LIVE from SaaStr Annual 2024- AI Summit Stage - Tuesday

Please welcome to the stage Christoph Janz, partner at PointNine.

Hello everybody. It's great to be back at SaaStr. Thank you so much for joining. I think this is the first session of the day. I think I'm the opener to Jason. Feels a bit like that band that nobody has ever heard before that's trying to make a little bit of a show before Coldplay or something. Something comes up. In any case, thank you so much for joining here. I've been to every, almost every SaaStr conference for the last 10 years or so. That usually means taking a 10, 11, 12-hour flight from Germany for me, where I'm based. This time it was just a 20 or 25-minute Uber drive because I moved to Mountain View for a couple of for 6 to 12 months. So that makes it very convenient. Okay, so really quick intro. I'm Christoph Jans. I'm one of the partners at Point Nine Capital. Point Nine is an early-stage venture capital firm focused on SaaS investments. We've been around for about 11, 12 years, have invested in a variety of SaaS companies. Some of which you might have heard about, such as Algolia, Contentful, Loom, Zendesk a long time ago, or some of the more recent companies, some of the more recent investments, such as Atio, Cyriact, and several others. We're very geo-agnostic. We're based in Europe, but we invest all over Europe in in the US, sometimes even Australia. I think the founder of Quiller, a company out of Australia that we invested in, might be somewhere in the audience. All right, so what I want to talk about today is the metrics that matter. Like, what is the data? What are the metrics that you need to convince SaaS investors with the right data? I've I tried to focus this on Series A and Series B rounds, which I'm assuming is quite relevant for many of you here in the audience. A lot of this is also relevant for later rounds with maybe some nuances. At the seed stage where we invest, things are a bit different. There is— there are a lot less metrics that we can use to make up our minds. So what I'm going to talk about is not all the things that you need to pitch point 9. This is more like what I think you need as you progress and try to raise a Series A or Series B round a bit later in your journey. I'll talk a bit about what investors will be looking for, what ways to on our experience will make them excited about your company, and I will share some dos and don'ts. First, maybe let's take a step back for just half a minute. Why should you spend the time to really get your act together before you start fundraising meetings? That's one of the things I I feel quite strongly about. If your data is self-explanatory, in good shape, easy to understand, and aligned with what investors really care about, you avoid a lot of follow-up questions and a lot of back and forth with the investors that you're going to talk to and that are going to run due diligence on you. That means you spend less time clarifying what does this metric mean. Can you send some more data on XYZ, which saves you a lot of time and allows you to talk to more investors in parallel and run a tighter process, which is very, very valuable, especially in 2024, where fundraising has become much, much harder than it used to be a couple of years ago. Last but not least, if you really have clean, high-quality data, that alone increases confidence with investors. And I haven't even mentioned it here, I'm hoping that almost everything that I'm going to talk about is data and metrics that you're interested in yourself anyway. Otherwise, there would be a pretty problematic disconnect between what investors are interested in and what you're actually— what you care about and what you use to run the business. So the first thing you need, and that is maybe obvious or maybe a no-brainer, a KPI sheet, both with your actuals and historic numbers and your projections. Depending on the stage of the company, this can go back for the last 2 2 years or so, or it can be since launch if the company maybe didn't really launch or commercialize the first product 18 months ago or so. I think projections should usually be for around 2 years. I think 1 year is usually not enough because you raise a certain amount that should give you runway for 18 months or 2 years. And so it's good to have a budget for that period. At the same time, I don't think it makes a lot of sense at this stage to have plans for years and years into the future. I think 2 years is about right. Then in terms of the granularity, for earlier stage companies or companies with a PLG motion, product-led growth, I think that month over month is usually the right choice. Somewhat later-stage companies or more enterprise SaaS-oriented companies with a longer sales cycle might also find that quarter-over-quarter numbers work better for them. So what goes into that sheet? It's actually pretty easy. You can really use the famous first principle thinking here and start thinking about what drives your business. So you start at the top of your funnel and you move down step by step. What that usually means in a PLG business is you have visitors or website visits at the very top. Then the next step is usually a sign-up or a trial. And then you have a conversion to a paid customer. And in more enterprisey SaaS, the funnel usually looks a little bit different. You typically have MQLs at the top, SQLs, maybe you have one or two steps in between, and then you also have new customers. And then of course you also need to report and budget for churn, both logo churn, meaning the number of percentage of customers that you lose, and revenue churn, which is the same but in regards to the dollars that you lose to churn. Then you basically just go down, you cover key financial metrics like revenue, MRR, ARR, which in a SaaS company is basically the same thing. Usually, unless you have a lot of one-time revenue is every— all the revenue is recurring and ARR is just MRR times 12, so that's simple. COGS, R&D, S&M, G&A, profit and loss, you can keep it pretty simple. You have cash in, cash out, burn, money in the bank, probably all the things that you're also thinking about when you think about a financial plan. One thing to, I think, include in a— for a SaaS company is what we could call like the MRR or ARR movements, or that waterfall. New business ARR, expansion ARR on the one hand, contraction and churn on the other hand. Sometimes you also have reactivation. So basically these components which collectively determine how much ARR you are adding in, in every period. A couple of more comments on the KPI sheet and the financial plan. I think the historic numbers and the projections should follow the same logic and the same model. This is something that we quite oftentimes see founders do it like not quite right. So you get a model, you try to understand it, look at all the projections, and then you ask for the actuals and it's a completely different model. That's— this just makes it really hard to process, right? So I think you should— you shouldn't make investors understand two different models. That doesn't make much sense. And also keep in mind, investors at this Series A and B stage, they will look at your historic trajectory and will try to make up their mind if that makes them confident in believing what you say you're going to do in the future. So any very big changes or sudden improvements are somewhat suspicious. So you have to explain them, them really, really well. And you make it really easy if you allow investors to easily connect the dots between the past through the present and into the future. Another thing is that you can really keep it simple. Not too simple, I'll talk about that too, but pretty simple. What I mean by that is that we see a lot of financial plans with a lot of really unnecessary details. It usually happens when you get an accountant involved. Like when you export anything from an accounting system and you don't clean it up massively, it'll have dozens, maybe hundreds of line items of cost categories. But I'm really not interested in how much you're spending on stamps versus stationery versus bus tickets. So you have to group it into categories that really matter. And really, it should reflect the business. And therefore it can't be too simple. So too simple is a business plan that takes projections out of the air and has hardcoded numbers for revenue, for revenues in 18 months from now, and I don't understand how that revenue builds up. So it should be a logical, easy-to-understand model with the right level of simplicity and complexity. As a rule of thumb, I have never seen in my life an Excel plan or a Google Sheets plan that had dozens or maybe 20 pages or tabs where it actually made sense? None. I've seen a lot of these, but I think they are all just really, really poorly done. If anybody wants to challenge me on that, I'd be— I'm totally up for it. Like, if you can make the case that there is a business, at least in the startup world, that is so complex that you need 20 pages to model that, let me know. I haven't seen it yet. I think it can be on 2, 3, 4, 5 pages maximum. It's usually one page or tab which has all the relevant metrics and then maybe you have an extra tab for some additional assumptions or maybe where you model like how your sales team grows, a few things like this. But I think it has to be digestible by an investor within half an hour. I think SaaS is not such a complicated business model that you need to, like, totally reinvent the world here. Last but not least for this one, make sure you include the typical benchmarks or health indicators that investors are looking for in SaaS. Things like customer acquisition costs, burn multiple, ARR per head, and and metrics like that. So what is it that investors want to see or what is it that really gets them excited? It's a combination between growth and efficiency as I'm sure you've heard many times or experienced in the last 2 or 3 years. Investors do care a lot more about efficiency than they did when money was very cheap or free some years ago. So they will look at things like a burn multiple at earlier stages and like rule of 40 or rule of 50 at later stages. But nevertheless, to even get them interested, growth is still the, the number one thing. And as a rough rule of thumb, a company that has a million or a couple of million in ARR, I think, needs to grow at 2 or 3x to really get a lot of investor interest. If you are at 5 to 10 million ARR, I think it's usually still 2x year-over-year growth to get a lot of investor interest. I'll just mention the last— things here briefly because there are a bunch of other things to cover. 100% NDR is something that investors really care for. Doesn't mean that you necessarily have to be there at the Series A, but I think there needs to be some path of, of getting there because people are really afraid of investing in businesses that keep churning dollars in the long run. It's different for more consumery or PLG-style companies that have strong virality or that have a, have a way of generating so much new business that they can afford a higher churn rate. And I mentioned this already a little bit before, you need a credible plan based on the trajectory of the past last couple of months, last couple of quarters, that is aligned with how much you want to raise. So whatever your budget says you need to— you need in financing needs to be aligned with what you actually want to raise. And this might be particularly relevant for Series B companies. You have— I think you have to have realistic valuation expectations. A lot of companies out there have raised a Series A or maybe a Series be in 2020 or 2021, and they might not have grown into that valuation yet because the multiples in the markets have just compressed by 80% or something. So I think you have to be realistic about that. The next piece that I want to highlight that I think you should have, whether you put it into your deck or into your data room, but in any case case you need to have it ready to share it before you start the fundraising process, are various types of cohort analysis. A cohort analysis is really the only way to get a sense for churn and retention, customer acquisition costs, payback, customer lifetime value in a subscription business. I wrote about this a lot for for many years. If you— if it's not that clear to you, I'll point you to some blog posts and templates later on. You should have cohort analysis for your customers as well as a cohort analysis based on revenue, meaning ARR or MRR. And you could also consider having a cohort analysis based on a usage indicator, like a certain activity that people do in your software. Especially if you're early on, this can be very useful. Let's say you have a number of customers on an annual plan, most of them started just 6 to 9 months ago. So basically basically you have no retention data if you look at revenue for those. But if you look at how they behave, how they use the product, how they come back, you get a leading indicator for their future churn or retention behavior, which can be super useful for yourself, but which also might be something that investors will ask you about. There are various nice, interesting, maybe cool ways to visualize the data. I've shown only two examples here. The chart on the left shows the retention for different cohorts at the 1-month, 3-month, and 6-month mark. So what you can see in this chart, if you go from the left to the right, that the more recent cohorts are doing better. That is a great sign for this fictional company here. If you look at the chart on the right, it shows for different cohorts the contribution margin over time. Contribution margin basically just means it's the gross profit of that cohort minus the customer acquisition costs. And so what you can see here is that after how many months after the initial acquisition does each of these cohorts break even on their customer acquisition costs. A couple of more tips and tricks or dos and don'ts on this. Don't mix monthly and annual plans. If you do this all in one bucket, it makes no sense, because some of the annually— and the annual plan customers, they didn't even have a chance to cancel their subscription. So you have to look at cohort analysis for monthly customers and annual plan customers separately. Similarly, if you serve very different types of customers, it makes sense to run these cohort analyses on a per-segment basis, and because the averages across vastly different customer types really don't really give you the same insights. And if your overall retention isn't great, maybe because you have some non-ICP customers or other some other factors that kind of don't make you look really good if you do that cohort analysis, you can consider zooming into your best-performing customer segments. So a little bit of cherry-picking in a fundraising process is allowed. You just have to be transparent about it. You have to explain it. And you have to— you shouldn't overdo it. If you end up with a statement like, "For our most active users, which we define as those that use the app at least once a week, our Wow to Mao ratio is 100%." That doesn't make any sense, right? So you can do that, but it has to make sense. What is it that investors are looking for here? They want to see excellent retention because SaaS is all about keeping customers in the long run. And they want to see this at least in one segment, as I've mentioned. They want to see positive trends, and they will look at your— at various cohorts to see if they can find some positive trends there. It could be that the more recent cohorts look better than the older ones. It could be like a so-called smiling cohort graph, which describes the situation when after an initial period of some churn in a certain cohort, the remaining customers spend more and more so that the curve goes up again after some years. The next thing I want to talk about is everything around marketing and lead generation. You'll have to include some data in your fundraising materials about how you are acquiring customers and where you get your leads from. That's usually data on how much you spend, how many leads you get, how many conversions— customers you get, on a channel-by-channel or source-by-source basis. You can see here a dashboard from GeckoBoard. It can also— can of course also be a spreadsheet, and you use it to show the costs for every lead or trial or SQL or customer depending on your conversion model and for different sources. This is another example for a portfolio company. This is drilled down into one specific channel, in this case LinkedIn. So this starts with the entire universe of contactable leads on LinkedIn, and it goes down through the steps, like how many persons are reachable, how many emails or LinkedIn messages did we send that man how many responded, how many responded to the second touch, how many booked a demo, and these things. So make it clear how you've calculated your CACs, because there is probably not one generally accepted way of how customer acquisition costs are calculated. You can do it in many different ways. So make sure to explain how you do that or add a footnote. Otherwise, that will for sure trigger a follow-up question from an investor. Like, they will ask, are these customer acquisition costs, are they blended across different channels? How about the organic signups? How do you factor in those? So you can define how you do it, and then and just be open about it. You can also in some cases exclude some of the initial startup or build-up costs in your budget because you're— in your budget, you're kind of estimating the costs to acquire the next customer, and the cost for that next customer might be lower than the first couple of customers, because initially you started with nothing, and so the headcount costs were probably very high in proportion to the number of fleets or customers that you acquired. But you have to be transparent about it, and it has to make sense to, to you, and you need to be able to explain it. What investors really are looking for here is they want to see one source or one channel that's clearly working and that seems to be efficient and scalable. It sounds simple, but it's actually pretty hard to prove that. Like, the question— if you get the question, how do you know that this channel or this source will scale to another 10x or 20x, it's a pretty hard to answer question because you don't really know it until you've done it. But you can back up your, your argumentation there. But expect that question to, to come up. Next one, sales and pipeline. Investors will of course ask you about how you're doing sales, what your pipeline looks like, how your pipeline has evolved. This here is an a snapshot of a pipeline evolution chart. This one is another visualization that I really like because it really shows you how the dollars are flowing through the different pipeline stages month over month or quarter over quarter. And what investors are looking for here, ideally every quarter quarter is a new record in terms of new pipeline added and closed one. That's not always achievable, but that's what investors, of course, what of course gets them excited. Another thing that we often observe when we see, when we work with companies or when we see pitches is that the pipeline in the middle of the funnel or top of the funnel keeps growing, but the closed won numbers don't really go up in the same proportion, what that usually means is something isn't quite working. Like maybe the ICP definition isn't tight enough, or you're not really disciplined when it comes to removing deals from the pipeline that you should remove. And this is one of the things that you can see in this chart here, because this also includes at the bottom the dollars in pipeline value that you've lost or that you've removed, which is— which is pretty important. Another sheet which I think is extremely helpful, which if you look at it as an investor really tells you a lot is the performance of your entire sales team, and you can anonymize the names, quarter over quarter relative to their targets, including those AEs that didn't work out. This is just an example sheet here with some placeholder data where you can see how that company added salespeople early on. There is a lot of yellow and red, so it took some time until this company found the right sales playbook. You see that John here, for example, he didn't really work out, so after 3 quarters he had to go, whereas Mary didn't achieve her targets in the first 2 quarters, but then in And in the third quarter she did. And so she kept performing really well over time. And then you see that in the subsequent quarters the company added more salespeople and was able to show that most of them got to their target levels after one or two or three quarters. And that is really exactly what investors care about. They want to see proof that you can hire and train AEs and get them to reach their quota in a repeatable, pretty predictable manner. That doesn't mean that every salesperson will work out. It's actually quite the opposite. If an investor sees a company with 10 or 20 salespeople and they've never let go a salesperson, that almost tells you something— tells you that something isn't working because it's kind of unheard of that every single salesperson works out. Last but not least, I think we are on the AI stage here, so we are in the AI hall, so we have to talk a little bit about AI before I finish. A lot in AI is less about data and more about, like, explaining what you do and the and the product and your vision. But there is also some data that investors will probably ask you about. It's— they will probably ask you for usage data because there are a lot of companies out there that had revenue numbers going through the roof and then had a lot of churn kick in as well. So a lot of budgets are available now because because there is so much experimentation. So investors care really about the details. They want to see your retention, both on a revenue perspective, both on a revenue basis, but also on a usage basis. Depending on the product that you're building, if you train your own model or if you fine-tune an existing model, investors might want to ask, might ask about the performance of that model, how the performance improves with more data. Is that proprietary? Is that data proprietary? Does it give you an edge over time? Like, what is also the threshold in terms of what a customer expects in terms of the accuracy of the AI and what you can deliver? And last but not least, because I see I'm running out of time, something that we are not are really used to from the non-AI SaaS world is really cost of goods sold. So they will ask you about the impact of using AI on unit economics. I think I at least, and I think others too, are not that worried about the costs of APIs usually because those costs are expected to go down pretty rapidly. But if you have an AI product, with humans in the loop, there will be the question like, is it credible that you can remove those humans and really automate everything in the near future? So what investors want to see when it comes to AI, is there real usage and real retention, or is it just a fad? Are customers really using that AI feature? Are they paying for it? Do they keep using it? Can this become a profitable business? And does it add to your, to the defensibility of your business? I think I ran out of time, so I'll skip the takeaways. I hope you got some takeaways from this presentation. If you want to look up some of these, some of the posts which are kind of like the basis for this short talk, go to our website, www.pointnine.com, all in letters. There is a library tab. If you look for things like cohorts, templates, fundraising, you'll find a lot of posts about everything from cohorts to financial metrics, templates, and related materials. Thank you so much for your attention. And next up is our two things. I'll do an AMA session in the Braindate lounge in 10 minutes, and Jason will be here for the VP of Sales Hiring Bootcamp. Thanks again.

Originally, this First day, half day was just going to be networking, brain dating in the back, but we decided to throw together some extra sessions. It always happens. I asked Christophe to do the boot camp for VC, and I thought, what could I do for boot camp? And I thought I could update some of the earliest things we've been doing for 12 years on SaaStr on hiring a great VP of Sales. This is some of our earliest content from the early days. We did it at one of the first DreamForces. We did it at one of Priestsop's early Point Nine events. We've done it. It really took off. And so I wanted to take a pause and think, what are the 10 mistakes that founders are making today at 2024 when they make the classic VP of sales hire? And, you know, in the old days of SaaS, I kind of made up a statistic. I said 70% of first VP of sales don't work out. I think I surveyed 11 people and I think 7.8 of them said it. So I think I coined 70%. I've done surveys on LinkedIn for thousands of people. They've confirmed it. And you might think 12 years on, we would be getting better at this. We would be getting better at making this critical hire right as founders. But I can tell you across my portfolio, across CEOs I talked to, we're not— we're just as bad as it— as ever. And I'm going to walk through 10 mistakes founders are still making, and some things were getting worse. My only hope is that 1 or 2 of these stick and you make less of a mistake. But the meta point, it took me 11 years to figure out one thing on this. 11 years. I'm embarrassed. I knew a lot of this 12 years ago. It took me 11 years to figure this out. It might be one of the 10 points, so it might be redundant. But if you make a critical hire in VP of Sales or any role at your startup, VP of anything, it's your fault. It's your fault. I blamed my first mis-hire as VP of Sales. I blamed him for not doing the job, for hiring terrible people, for writing a letter to my board saying I was incompetent. I blamed him for that, OK? I did until about last year. It took me 11 years or 12 years to realize it's my fault. I hired him. VPs, your executives, anyone on your team can never do enough due diligence. They can never understand what your go-to-market motion is like, what your metrics are like, what your business is like. When I do investments, I interview a lot of VPs for the founders at $1 million, $10 million, $20 million, $60 million in ARR. And I, and I try to go last. I try to be the last one for them to interview. And I always ask them like a basic I question them like, well, do you know how much revenue the company has? Do you know how fast they're growing? Do you know how many sales folks are on the sales team? 9 out of 10 of the executives have no idea. And we can mock them. We can say, how could you know? How could you have spent 8 hours to meet, 2 hours with the CEO, one with the CTO? Well, how could you not know these things? And yeah, the best ones do know. But all of a sudden it clicked on me. We don't, we don't It's our fault. We don't qualify candidates out enough. We move too quickly. We don't do reference checks since March 2020. We want to get it done and it's always our fault. The candidate can never do enough diligence. So it's always your fault. So that's my meta-learning that I want to talk through. But okay, what are the 10 mistakes or 10 points? Now, this one is newer. This has become a vibe. What did Paul Graham call it? Founder mode. Did anybody read this? Anyone hear of this founder mode thing? I think a few people saw it. Great. Be you. Founder mode does not work for sales. It does not work for inside sales. It does not work for— there are elements of it that work, which we'll talk about. There are elements that work, but you need a sales team to scale sales. You do. Founder mode in Hiring sales means not exiting sales, and we'll talk about that a bit. Even if we don't, let me hit it. The number one mistake that CEOs, founders make when they hire a VP of sales is they exit sales. We've talked about this on SaaStr. They're tired. They've been doing founder-led sales. They hire Linda, they hire Bob, they hire Amelia, they hire Jason, and they're out of here. They leave sales and they disappear for 6 months and sales goes in the toilet because the VP of sales doesn't know the product. They don't know the customers. They don't know what happened. They were never trading. They were never onboarding. Again and again and again, founders exit sales when they hire VP sales. You cannot do that. You have to spend just as much time in sales after you hire someone as you did before. It's just your time should change. You should be more of a middler. A great VP of sales will grab you and bring you into 10 deals a month instead of you having to do it, but you'll never get the time back. But what I see founders doing, which is newer is they're either staying founder-led too long or they're reverting to founder-led. They're reverting. And look, if you've got— you're closing million-dollar deals and you have 2 reps working for you, it's $500K, $400K deals, you can probably even get to $8 to $10 million being founder-led. You don't need that many people. But even there, you— there's too much time, there's too much to do. And so I see I see founders not even thinking about hiring a real VP of Sales until 8, 10, 12 million ARR. It's too late. There's too many people. And I see a new thing with some of the best founders I know who got burned. They've had a mis-hire for their first head of sales and then their second, sometimes their third. And they're like, frack it, frack it. I'm going back. I'm rolling up my sleeves like Paul Graham said, and we're going back to founder-led. We're at 17 million ARR. I know we have 4 products and 80 people at the company and I got 11 VCs, but I'm going to be the— I was never that good at it, but I'm going to be the VP of Sales now. I tried to do that myself as a founder. I lasted 4 days. I couldn't handle the 12 folks on our team. I couldn't handle it. Maybe you can. Okay, but when you get big, it's too much. You can't run outbound yourself. You can't do— you can't spend your entire week doing an ABM strategy. You can't be in every single deal. It doesn't work. So if you make a misfire or two, And you go back, founder, like, because you got no choice, because it's your fault, but you had to let Jason or Amelia go. It's fine for a month, a quarter, but start recruiting the next day, the next week when it doesn't work out. You cannot go without a head of sales for a year and get from 10 to 20 to 40 to 80. There is too much human capital required. Sales has no efficiencies whatsoever in it. You need even more people the bigger you get. It has dis-efficiencies of scale. Software is wonderful in theory. You write it once, it can be read everywhere. This has worked great since the days of floppy disks and DVD-ROMs. It has never worked in sales and never will. You will need to hire headcount infinitely, linearly with revenue, and you can't do it without help. So this is my advice. Even if you're not sure, buy $2 million in ARR, be hiring your first head of sales, and we'll chat about the mistakes. If it doesn't work out, hire another. And if you go back to founder-led, don't stay. Whatever you do, don't stay there. Paul Graham may or may not— he's much smarter than me, I am, much richer, much better investor, but he never ran a founder-led sales company. Okay, he didn't do it. And he didn't mean founder— maybe he did, but in my mind, he did not mean founder mode or whatever it's called to mean you be the VP of sales at $23 million in ARR or even $6. Don't go back. This is a big mistake. Okay, next one. And this one is new to— maybe this was true before that little bug went around in 2020. Maybe it was always true, but friggin' A, it is the truest thing in hiring any VP today. Whether it was being locked up in our backyards for 8 months, whether it was the markets exploded in 2021, coming down in 2022 crash. And there's been so much change in 4 years. We are full of executives that are the jaded, the broken, and the done. The jaded, the broken, and the done. They need a job. Okay. That side hustle as a fractional CXO didn't work out. Their clients dried up. They need a job again. They're back out on the market. Sometimes that can work. Don't get me wrong. Or the 11 side hustles they were running. I don't know. But we've all been through so much. Here's the issue. When we started Saastr, you couldn't find any VPs. There weren't any VPs that had come out of Datadog or Mongo or Klaviyo or Bill that are here, the CEOs here, or any of these great companies. They just— there were only so many executives when we started Saastr. Today, you know, there's 100 public SaaS companies that are all turning over directors and VPs and senior directors and senior managers, hundreds of them every year, and you will want to hire one of them. Even, even folks that are here at Duplo Cloud and Notion, whoever, we can read them here at G2. Folks, great folks will leave G2 or whomever, and you'll want to hire some of them. And these are great companies, but you got to be careful. Too many folks are jaded, broken, or done. And I guess they're the same thing, but I'll give you a few tells. Don't hire these people if they're— we need pirates and romantics in your startup. You need folks that want to go on this crazy journey with you, not phone it in from home, not phone it in working 18 hours at home and just managing people. You don't need that. So number one, don't hire the jaded, the one literally 4 minutes into your interview, they're telling you how the CEO or the VC screwed them over. I can't tell you how many times I heard it. I crushed it at my last startup that didn't make it, and sales went down when I was there, but it wasn't my fault. It was that stupid CEO who didn't know sales. That dumb CEO. That idiotic meddling CEO. I'm sure there's truth in that. Anyone that says that, I'm sure there's truth. Don't hire them. They're going to think the same thing of you about 3 weeks in.

Okay?

They're going to think the same thing of you. Okay? They may be right, but they're broken. The next one. I crushed it. Okay? I took the company from $1 million to $800 million. Single-handedly, myself. But I made nothing because the VC screwed me over. The VC screwed me over. We raised $500 million and sold for $80 million. Okay, I don't think the VC screwed you over. Okay, you sold. This is called life. I don't know if Christophe got into this last presentation. You sell for less than you raise, no one makes any money. Okay, I'm sorry, cry me a river, but this isn't charity. There are no no best efforts points. There's no participation points, folks. This could be half the presentation. There's no participation points in SaaS. I'm sorry you busted your ass and the company sold for less than it raised and no one made any money. That's life. You didn't crush it. Okay, so anyone that tells you the VC screwed them, it didn't work that way. There's— there is no magical deal out there where the VCs 10x their money and this great executive you're meeting made It's just the map. I can explain venture map. Doesn't work that way. OK. There are times when the VCs get their money back 1x and employees make nothing. That does happen. And maybe that's not fair at some level. That's not crushing it. Making 1x extra money in 10 years as a VC is not exactly crushing it, is it? That's a 0% return. Like, I mean, IRR, it's not, it's not that great. So you got to let these folks go. Their related cousin is the broken. Jason M. Lemkin. They don't want to sell anymore. So many sales leaders I talk to don't want to sell. This is going to be a theme. Don't confuse what they did and the beautiful PowerPoints they have and their endless discussion of their brilliant process and process and how they do process and how great they are at process and how great they are at managing process. They don't want to sell anymore, but they need the job. They don't want to do it. You got to do Do they want to sell? Ask. Here's the simple way you can figure out if they're broken. What do you want to do, Jason M. Lemkin, your first 2 weeks on the job? Amelia, what do you want to do your first 2 weeks on the job? Brendan? Oh, I need to set up processes. Don't make the hire. If they don't say go meet friggin' customers the first 2 weeks, do not make the hire. Anyone that wants to sell wants to be in deals the first day, the first week. I want to go, I'm going to get on the road my first week and go meet your top 10 customers, and then my second week I'm going to start closing them. That's what you want to hear. That's what you want to hear. And it's probably true, but too many folks worked from that ADU in their backyard, got bitter, stock went up, stock went down, thought they were millionaires, weren't millionaires, and now they just want to manage a team and not sell. There's too many folks out there. They just want to manage a team and not sell. Do not hire them. They're broken. And the last ones which are related to it, They're just done. They're really nice. They've been a fractional CRO for now 4 years. They went fractional in June when it was easy. Now we're in September. They've been fractional for more than 4 years and they're nice. And they, and again, they have great strategy slides. They have great triangles and squares and arrows going everywhere and how you onboard 700 reps and their patented onboarding strategy. But they're done. They're done. Again, simple test. I ask for all of this. What do you want to do your first 2 weeks? Christophe? Jane? You don't hear customers. Don't, don't, don't, don't. Not even sell, but that's good. You want to hear, I'm going to go meet customers. I'm going to get on the road. I'm going to go talk to prospects. That's what you want to hear. And I'm going to bring Brendan and Sam with me. I'm going to bring these 2 guys with me. But that used to be enough. But there's too many folks that just want to manage and not work that think they have a couple of folks to bring with them, which we'll talk about. It's not enough, but you want to hear, go meet customers. OK, we hit this one. I'm not going to be redundant because I guess I got it, but I'm going to be redundant anyway because you're all so many. This was not a mistake that I think we made before March 2020. I got to say, 80% of the VPs of sales candidates that founders that I know invest in, work with, ask me to meet, 80% bring me this guy, gal, whatever. No gender, they just, they won't do the sales themselves. Again, process slides. I have my two weeks right here. Process, not meeting customers. Trust me, it's 80%. You got to listen. Just because they talk the talk about what, how is so great at Datadog and how it was so terrific does not mean they will do it anymore. They got to do sales themselves. How long? Probably once you hit like $200 million ARR, they can get out of deals a little bit. But I think most of of you are under $200 million ARR, and maybe not, maybe not, right? There's this classic story that I've told before if you're old OG Saastr, and then there's a newer version of it. But the classic story was one of, one of our first 10 in the old days biggest customers was Groupon. When Groupon was exploding, they went from like 0 to 1,500 sales reps in a year and a half. They're all using Adobe Sign, EchoSign. Great, you know, almost 7-figure deal. So we flew out there and middle of a terrible Chicago winter. It was like January or February. I had a really thin, like track sweatshirts that used to be in back then, about a millimeter, a millimeter thick from Zazzle. Wind was ripping through me at 20 degrees in Chicago. Go up there to Groupon, hanging out, doing our pitch, and next door is friggin' Marc Benioff, who flew in from, from Hawaii on his jet to meet with then 24-year-old Andrew Mason, one of his, you know, a new like $50 million a year customer, because you got to be in sales. He's still doing it. Marc Benioff said he still goes to Davos every year because he sits at the top of the staircase there and he meets with 200 customers and prospects in Davos, flying there. Now we, we can't all fly private. It is convenient. It is convenient, but there's a point here, right? You got to meet the customer. So even at $200 million, Salesforce is coming up on $30 billion and Marc Benioff is still out there hustling and meeting with customers. If you're a VP of Sales and gunner, CRO, pass. Don't matter what else you like them. Okay. This one, a lot of you are going to want to give on. You're going to want to challenge me on. You're going to want to cut a corner here. You finally found someone that's actually willing to leave their home.

Okay.

That's willing to actually go meet a customer in person. That's willing to actually sell and not just manage a team. You finally found that. It took you 4 months. But they don't— it's not clear they really understand your product. It's a little complicated. It's environmental SaaS. It's a deep type of compliance. It's a new type of SOC 7 or 11 or 82, and they've never really done security before. But they worked at a sale— half these folks worked at a sales-led company, which they're salespeople. Like, how hard is it to sell an e-signature or Salesloft or Outreach? I mean, I'm not saying it's, it's easy, But if you've already used the tool for the last 5 years, you kind of probably have an intuitive sense of the product. Going in to sell a complicated piece of regulated software in a new industry, most people can't make the jump. Okay, that's an issue in and of itself. Number one most important thing, do not give on this. Everyone has— this is— no one does reference checks since March 2020. No one asks sales reps to do demos before they hire them anymore. Horrific error. And everyone hires a VP of sales that never learns the product until after they start. Never. There's a company I invested in. I love this company. They got to $10 million, hired their third VP of sales. Great guy came in. 6 months in, sales were down, way down, way down. But honest, most honest guy in the world gets up in the board meeting. He says, I got to be honest, I I didn't actually learn the product when I started. I thought I could do it. I thought I could do it. I thought the simple tagline of this company, which is great, the tagline is great. It turns out you go in, the customers just cut his head off. They wanted to know the deep ways it's integrated with 28 leaders, how the workflows worked, why, and importantly for sales today, why you would win when they have 10 competitors. You cannot walk into a meeting in this world when it is— when some areas are in a downturn. I don't believe we're overall in a downturn, but everything's harder. You can't walk in there and think you're going to be a people person when whomever, Duplo Cloud or Drata or Justworks walks in there and they know the friggin market cold. They know where you're weak. They know how to fix, they know how to solve your problem as a customer. And Mr. Backslapping Lunch Guy comes in and just wants to talk about where do your kids go to school? Oh really? My kids go to Nueva, which is right over there. That's great. Next. OK. I got 99 problems to solve, and us talking about sports or the Olympics or the Tour de Italy ain't solving one of my problems. And it just does not work. I see folks just get slaughtered in sales when they're not product experts. From the bottom to the top. From the bottom to the top. We are all such— we are all— every year we are smarter buyers, all of us, up and down the stack. And you cannot go into that meeting and not know the product. It is embarrassing. It is embarrassing. Whatever you do, you can't hire a VP of sales that is not willing— and I know many will challenge me on this, sales leaders. They'll think about this and then they'll come— they're going to come back to me 3 or 4 months later and say, you're right. I wouldn't let them start until they know the product cold. I wouldn't let them start. Now, best of all is literally give them the— if you really think they're so great, give them the offer, agree agree on the comp, agree on the equity, and say, you know what, now take a month before you even show up and go learn the pro— I don't even want you starting. Go to all of our webinars, go do whatever, you be you. You show up October, Halloween, not tomorrow, and you show up an expert, right? And a related point, I remember in the early days of Gusto, Josh Reeves, a very distinctive CEO, but I remember he had this thing that at the time I thought was I thought was crazy, which is when Josh would hire a new executive, I think he wouldn't let them work for like 60 days. And I think, I think at this time we can ask him, I think he more wanted to make sure they knew the Gusto culture, like you have to wear slippers in the office, not shoes, and there's a certain way of doing business. And maybe that was the goal, but there's something to really knowing the company and the product as a leader before you start. And I just see train wrecks. You come into a complicated space and you don't know the product. One of my favorite companies I've ever invested in, they just broke up with their second VP of Sales after over a year, and they closed their first 7-figure deal the other day. 7-figure deal a year. The VP of Sales allegedly was an expert in the industry. He had worked at a competitive company before, but always had a team of SEs, sales engineers, and solution architects with him, never learned the product in a year. For this 7-figure deal, they left him outside in the lobby. They left him outside because the last big deal, he embarrassed them. Not because he's not smart or a good person, but he could not go in front of a Fortune 500 CTO and talk API and security with the Fortune— he embarrassed them. He embarrassed the founders. So for the next 7-figure deal, they left— first, they left him in the lobby. They flew out and they left him in the lobby. And that was the right call because he never learned.

He had—

maybe you can make this work with 10,000 SEs, but most of us don't have enough around. So this is just me. Maybe you could wing this pre-2020. Maybe you could wing it in 2021 when people would buy anything with a pulse in some categories. Okay, maybe you literally could. I don't think this works today. Either make sure they're a product expert before you start Force them to do a demo that you believe that you would hire, or give them a vacation until they start. But don't let them start up thinking that they will learn your product on day one. We don't have— they'll close nothing. Okay. Related point. This one seems so obvious, my friends, but it's maybe the most important. I know I put it on 5, not 1 or 10, but it's probably the most important point in here. Whenever a VP of sales doesn't work out with— and I talked to the CEO and I talked to the founders— the other 4 things are true. Were they a product expert? No. Okay. Did they really want to sell? Meh. All these issues came up. Were they kind of checked out? Yeah. Did they bash their last— did they blame the VCs? Sure. Yeah, yeah, yeah. All these things. Then I asked them at the very end, did you 100% believe in Jason? Like, did you know in your heart and soul that she or he would be successful. And they always say, no, I never— I got tired. I'd been looking for 6 months. I needed an answer. He was the best. Lemkin was the best one I could find. And we all have to settle at some level, like Mr. Perfect, Ms. Dashboards is not the right call. But they never believed. They never believed. And the ones that fly— when I hired Brendan Cassidy, who we've talked about, he's probably here. Who had been the first head of sales at LinkedIn. I had disagreement with one of my VCs who thought he would, well, wanted someone more senior, whatever. This was years ago. I knew 100 frickin' percent in my heart he was the guy. I knew it for a couple reasons. I knew because I'd done a reference check with him about a year prior, and he gave me the best insights of any sales leader I'd ever talked to, just in a reference check, for good at recruiting. I knew I wanted him. But most importantly, even if I was wrong, I knew I want him, so I backed him on anything, wherever he needed help. And most importantly, your job as leaders with your VPs is not to tell them what to do, it's to backfill them. This is where the founder mode comes in, not to do their job, but to back— not everyone can be great at everything, so you got to backfill them. If you 100% believe in them and they need you in Chicago at Groupon in the middle of the winter with a 1mm jacket on, you're going to be there. If you don't believe in them, you're going to give up on them. Them. They're gonna fail. So don't hire any VP, doesn't even ask, that you don't 100% believe in. It doesn't mean you need to be 100% right, but you have to say, in my gut, I love Jason, I love Amelia, I love Brendan, I love Sam. No matter what anyone, no matter what anyone on my board or any of my— even the rest of my team, the best ones, often your team will be split on because they may be a threat to the way things are, the way things are. But this is the number one, but I always have to do to really Do you really believe in them? No. Founders know we have that spider sense of even if we haven't made the hire, we know who we think is that, that your jaw drops, the best of the best. And don't make the hire, it's not gonna work out if you don't believe. Okay, point 6. This seems minor, but again, this is a new one over the last couple years. This mythical full-stack salesperson. Mythical full-stack. We talked a lot about this with Sam Blan, who was ex-CEO of Brex, in our Miami meetup earlier this year. I'm going to come back to that in a second. This does exist, but it's rare and it has to exist at birth. Okay. And what do I mean is today everyone— there's this meme, there's this myth, there's founder mode, but there's also this full stack AE and full stack VP of sales and CRO where you know how to do everything. You're great at— I do my own outbound. I do my own qualification. I do, I do my own training. I do my own onboarding. I'm my own SE. I close everything. I go, I go from SDR to close to everything. And I get what these want. This— there's nothing more frustrating than a founder than when half your sales team just waits for the inbound lead to come and that's all they do. They just want the inbound lead to come in and say, I want to buy today, and then send them a document to e-signature. That's half of sales in SaaS, and I'll share data on this tomorrow. I'm not making it up. And it drives us nuts. And we want this, and we think we want this full-stack person, but they're really rare. Folks that, you know, haven't done outbound, they can't learn on your dime. Folks that haven't done partnerships, channels, technical buyers, in-person, price point, the points I put out. And so it doesn't exist for a sales rep unless you train them from day zero, in which case it's possible. But you have to only hire folks that have been full stack that have earned their own soup, that have earned their own keep. Most importantly, for VPs of sales, do not expect a full stack VP of sales or CRO to magically happen. Ask, ask them if outbound— here's, here's a perfect example. This is my real point. And I can give you so many stories. If you, if you're, if outbound is not part of your model, if it's 100% inbound, then you don't need an outbound expert today. Maybe you want to add it. Okay. If your model is like 20%, 50%, 80% outbound and you want it to go up and you love this head of sales, but they've only done inbound, 0% chance of success. What are they gonna spend a year learning outbound? They're gonna go buy Nooks or some other tool here and magically turn it on. I mean, these are great products. That alone is not enough if you've never done it before. Another huge flag is direct versus indirect revenue. How much revenue you get direct or versus partners. I just talked with the VP of sales I've known for over a decade that flamed out at a SaaS company at $40 million, got fired, okay, at $40 million. And I said, what happened to this guy? He's like, well, it took me a year to realize half our revenue came from partners in the channel. I'd never done that before, he said. So not only did it take him a year to figure something out he should have figured out the first week, but he never leaned in on this indirect selling because he was only a a direct selling guy. Okay, you didn't get it. Couldn't be full stack. Partnerships, channels. Can they sell to a technical buyer like we talked about where they left the VP of Sales in the lobby, right? Are they willing to sell in person or only on the phone? This sounds— this was a big— this was still a big deal before 2020. Today it's a huge deal. If you've only sold again from your ADU or from home and your motion and you sell more when you go visit customers and it's true of like 96.842% of us, and they're not willing to travel, they're not gonna start traveling when they magically join you. I interviewed almost 40 VPs of sales last year, early last year. Only 2 were actually willing to travel. You can laugh. Only 2 out of 40. My point, there's a lot to read into that, but my point is don't expect your VP of sales to do these things, outbound, partnership, indirect. Technical selling, travel, that you, if you know you need them, if they are already part of your motion, ask if they've done it before. Just be kind. How much outbound have you done? How much partnership sales have you done? How much channel sales have you done? How much traveling did you do at your last job? Do you mind? Oh, I love it. Like, I can't stand being at home. You know, my husband drives me nuts. Great. Okay. But you got to ask this. Don't— the meta point is don't assume. Don't assume they will do all of it. Most VPs, sales heroes either won't, haven't, or don't want to. Okay, the next couple ones and then we can take questions with our remaining time. This one's an oldie. This one hasn't changed. Some of this stuff is new, is I think new vibes since 2020, especially since 2023. This one slide I think I wrote in 2012, 2013, 2014, 2024, 2025. But man, this is brutal, my friends. This is brutal. A mis-hire in a VP of sales sets you back a year. The only thing that's changed in my learning as we started it is it's your fault, not theirs. It is your fault if you make a mis-hire. You did not do enough diligence. You did not spend enough time in person. You did it over Zoom. You did not understand that actually they've never done channel sales. They've actually never done outbound. You did not understand that they are not They've never sold to a technical buyer before. They've never sold in your industry before. You skip too many steps, it's your fault, but it will set you back a year. A year. Why? A couple of things. The first one is when you make a true mishire, sales always goes down. It happened to me. It happened to half the people here this week or more. You go in in the product-led stage, you're not a great seller, you're not a perfect closer, you know the product cold the customers love you, and then you disappear from sales and you bring in someone that doesn't know your product. What do you think happens? Sales goes down. Those deals don't close. Even worse, she brings in or he brings in 2 reps that don't know the product either. Now you've got 3 new sellers on your team that don't know the product or the industry, throwing them at deals where if just you and Linda did it together, they all would have closed. They all would have closed. So it gets worse, and then they hire 3 3, and then they hire 10, and all your money's gone. Okay? And then you know it after a month, and then Saastr says only give them 30 days, but no one believes it, even though I wrote that post. And you give them 60 days and 90 days, and then you're in— if you have any investors, they say, well, I mean, Jim's a nice guy, he's pretty good. The board who's talked to him twice, give Jim another quarter. So now you're 6 months in, 7 months in, and then you go to let Jim go in month 7, and he kind of changes your mind because he's a good sales guy, and it's 9 months and he's hired 10 people, and then you finally move on from Jim and you start your search for 6 months. You've lost a year and millions. Avoidable story is again and again and again. So look, there are certain mishires or, or mistakes you're going to make that are very— you know, there's the old saying like, push down or do the mistakes that are reversible, slow down the the big ones that are irreversible. This one's in the middle. It's not irreversible, but boy, it's damaging. So when you're tired, when you've been looking for 6 months, when you've honestly interviewed 30, you're not pretending you've interviewed 30 candidates like we do, but you've really interviewed 30, and you meet with Jason, and you're not 100% all in, just realize, push on and find someone you love in life, in hiring, as a co-founder. Find the one you love, because you're going to lose a year when you settle. It's not worth it. You think settling is good. You think, look, I know I'm tired, I know Jason M. Lemkin's not the greatest VP of Sales, but at least I'll have somebody. There is a little bit of rarefied air between very good and great, don't get me wrong. That's taking risk. But when you settle, sales will go down, all the money will be gone, and they'll hire 10 terrible reps. It's not worth it. To buy yourself 2 weeks of mental relief of having made the hire. It's not worth it. You'll lose the year. OK, and these ones are updated versions of older points, but I gotta tie it all together so we've all done it. This mistake we actually used to make in the early days of Saastr all the time, because we didn't have all the veterans. We didn't have all the folks that had come out of Mongo and Salesforce. And actually, we had folks from Salesforce when we started Saastr, but there wasn't enough others. Now again, there's 100 public SaaS companies to recruit from. So in the old days, we would hire folks that were too junior to do the role. Now we're hiring hundreds and hundreds of folks that are broken, burnt, but certainly have the title on their LinkedIn. But still, what are you going to do? So you can't hire the SVP from Salesforce or Mongo or Twilio that doesn't want to sell anymore. You can't make that hire. So you can go for that perfect Goldilocks person that has everything at the right moment in time, in the right hour in their career. And yeah, they have an offer from OpenAI and Cohere and Glean and Notion, but they still want to join your startup they've never heard of. Of course they do. Of course they do, because you're such a great founder. Uh, but so that Goldilocks person probably doesn't exist. So when you've decided the SUV from Datadog is wrong, that got fired because he never left the ADU, and you've decided Mr. Goldilocks doesn't exist, then you realize you You got to hire a stretch. You got to hire a kid. Now, this kid may be 60 or maybe 26. I don't know. But what I mean is you got to hire someone on their journey with energy that's going on the way up because this is their shot to be your head of sales. Of course you do. Of course you need to stretch higher. But there's just one thing you have to do when you stretch higher. They're not going to have the full package. They may not have worked at the right place. They probably even got fired once if they're a pyro dramatic and passionate. It's okay. Getting Getting fired from every job in sales is probably bad. Getting fired just once, kind of a good sign. Just once. But you cannot— the whole point, going back to the first point of why you can't stay in founder-led, at the end of the day, if you can actually sell and you can learn the product and get out on the road and you can talk to customers and you can do the sales process yourself as a VP of Sales, not skip it because you want to be a manager, but do it yourself, then it all becomes about human human capital. I've got to grow the sales team from 2 to 4 to 8 to 16, 32, 64, 128, because our revenue is doubling each year. Whatever it's growing, you have to roughly grow headcount with your revenue and sales. You can't avoid it. $500K quota, $800K, $400K, it doesn't matter. You can't increase it to $4 million. It don't work that way. So if your yielded quotas for an AE is $500,000 and you want to add $5 million of bookings, you need 10 10 scaled reps. And if you want to add $50 million, you need 100. You can't get around the math. So at the end of the day, if they know the product and they can sell, the most important thing is recruiting. VPs of sales are the best recruiters on your management team because they're constantly recruiting. So make sure, even in a stretch candidate, that they have hired 2 to 3 salespeople that hit quota before. Not 20, not 200, but it's not enough if they inherited if not enough, if they were on a sales team. It's not enough if they were an SDR that got promoted to manager but never hired any of the SDRs that reported to her. They have to have found, hired 2 people and made them successful. If they can figure out how the hell to find 2 people in this crazy world where everyone really wants to work 10 hours a week from home, if they can find 2 people that can hit quota, they can eventually find 200 for you. Because it's hard to find 2. So ask them who the 2 are nicely. And then say, hey, can I go talk with, you know, Puya and Robbie? Just ask. And if they're any good, they'll connect you on the meeting with Puya and Robbie, and you call them up and just ask the question, how is it working? How was it working with Brendan? What was it like? How did he find you? Oh, he hunted me down, right? He hunted me down at this event. Here it goes, great thing. He lured me out of this company, and I closed $600K with him the next, in the next 12 months. Great story. How'd you do it with Ravi? Hear those stories. No one does this anymore. You don't want to do this because you want to believe that LinkedIn's going to work out because you're tired. You don't want to do this because you're worried what you're going to hear. You're worried that they never really hired 2 reps before, that they don't actually know how to recruit. Because the folks that don't, you know what they do? They show up first, they work on their process slides for a couple of weeks, then they Then they tell you they're going to spool up a few recruiters they worked with before that they never really worked with before. And so 3, 4 months later, they've hired 2 bottom-of-the-barrel reps from some recruiter they don't know. Great. That gets you nowhere. I've said it before, but it's worth saying again. Any great sales leader always has a couple folks ready to go with her the next day. They— and I know you got to be careful with this word this day, but it's true, this word— they groom them. They groom them. The best sales leaders are meeting with tons of folks up and down from SDR to AE to senior. And they're asking, I want to work with them. I want to work with them again. Or they're meeting with VPs of sales that leave a hot startup. Who is the best person on your team? Linda, Amelia, and Stacy. And they go meet with them because it's half the job at scale. Half the job is recruiting. So if they can't bring two good people with them, they'll never do it. And just Just go talk to them. Just, it's, and I ask so many CEOs this question. Okay, you hired Jim. Does he have any to bring with him? Yeah, Jim's got a couple of great folks to bring with him. Did you talk to them? No. No. 80% chance those folks aren't coming with Jim or they don't exist or they were sort of somebody he worked with. It's not true. You gotta talk to the two. If they can hire two great folks, folks, they can hire 200. Think about it, it's true. Okay, penultimate point. I'm forgetting what the ultimate point is, but this one's so important. This one is so important. If you guys have investors, they're— listen, they're right on many things. They're almost always wrong on a VP of Sales. I can't tell you how many boards I've been on, how many startups I've been on, where every single VC is wrong. They're all wrong. All of them. All of them. All of them. They're all wrong. They all love the handsome 6-foot-4 paratrooper that talks the talk in a deep voice and looks good in a button-down.

They love him.

And he talks quota attainment and quota metrics and funnel management. And he talks the talk. And he's got a— I can't— I don't know what a baritone is, but he talks all the great— you know, I had 100 and at 11.6% and I was at 11 President's Circles. I was at the— and I, oh, I love them. And I was at— I knew Reid back when at LinkedIn. And I knew whoever. I knew them all. I knew Tiago at TalkDesk. I knew them all. And your board falls in love with the name dropper, paratrooper. They love them. They don't know. They don't know. And why? One, most of VCs have never done sales. They've never done it. And they don't know. So they give you terrible advice. The subtler one is there's more and more VCs that were CEOs and were founders back in the day, and those are great. All things being equal, pick one of them. Not that big a deal. We could talk about it, but it's nice to have a VC who was a founder, a successful founder. There's a lot of reasons that's comforting. There's only so many slices of your cap table you can give up. It's nice to have a successful CEO. The problem is The company they founded 12 years ago with a million-dollar ACV in a different industry is not yours. It's not the same product as selling to restaurants at $2K a year. It's not the same. Uh-uh. And so just because they know sales doesn't mean they know your sales. So they give you bad advice too. They're mapping it. That's so common. So again, just listen to your VCs and investors. And it's not that they won't have a feeling. Few good, but I just think 87.2% of time they just give you the wrong advice for VP00. So be nice, nod your head, say thank you, but if your gut is, if your gut isn't 100%, don't make the hire. And again, if your gut is 100%, they tell you it's the wrong hire, tell them thank you and still make the hire. Okay, last one, and then with whatever time we have left, I think we have time, I'll take any questions questions you guys want. This is new. It's old. This is old, but it's new because in that earlier slide I talked to so many founders have given up and gone back to founder-led sales. They've given up. They've given up. It's not just they made one bad VP of sales hire. They made two and they're burnt and they're tired and they lost, they burnt half the money and they lost a year and they did it twice. And they realized, shoot, I'll just do the million-dollar deal myself. I'll just go up to the customer and close it myself. I've been doing this for 5 years. I'm tired of it. Was just emailing with the CEO I invested in this morning. Got the company to $20 million, 2015, 2020. So from 2015 to 2020, got it to $20 million. And then it— and then he went to $20 million and then $20 million. Went through 3— then went to founder-led, then finally found his guy. Got back to 40% growth, not 100%, but back to 40% growth and sold his company for $300 million. Who was that third VP of sales? Gave up for a couple years. Gave up. Went into founder-led sales at $20 million in the desert. Did it all himself, but there was churn and there were industry issues. So for every new customer he brought in, he lost one. And he was bailing out the boat, but he didn't have the help. And he couldn't— those two bad VPs of Sales and the terrible COO, he couldn't get over it. And then he finally found the one he loved. And going from zero to 40% and having a company that had no value to $300 million, pretty big change. So my point is she is out there. She is out there. There are, even in today's world, there are ambitious folks, sales Sales doesn't breed ambition the way it did before March 2020, but it still breeds ambition. It's competitive. The best folks want— in sales want their shot. They want their chance. They want the chance. They want the bar. They want the big equity. They want the chance to put that VP of Sales on their resume. They want their shot, time in the sun, especially if they worked under a great one. What you'll find is the really charismatic, successful VPs of Sales. Like on my own team, Sam Bohn, Brendan Kessie, why are those folks the heads of revenue at Rippling and Brex and so many other companies? They're all our team and so many leaders. Gong, why did our team, I mean, yeah, they were very good, but they also were breeded to wanna be Brendan or Sam. They wanted it and they went out and they've become the CROs at 10 iconic leaders from Rippling to Gong to Brex and others. They wanted it. So these ambitious folks are out there, even, and give them their shot. Keep interviewing 100, and if you don't think there's a great VP of sales out there, it's because you've never worked with one. This is maybe the last point I'll make and take a break. This was an old, maybe one of the best blog posts I ever read in my entire life was years ago, a guy named Joe Krause, who you won't know, He founded Excite, which was an early Google competitor that got bought for billions. And then he founded an early collaboration company bought by Google. And one of the first things he wrote when he was at Google is, "If you don't think you need a general coun— a great general counsel, it's 'cause you've never worked with one. You think legal is stupid. You don't see the point. It's wasting your time." But when you've worked with a great— when you're growing and you have a million contracts and risks and you've worked with a great lawyer, you're like, "Jesus, that's great." Turns out I've rewritten this for us. It's true of everything. So many great CTOs today think they don't need a VP of Engineering. I'm tired, I don't want someone that just does process and wears a blazer. You don't need that. But if you've worked with someone that is amazing, you will never go back. When you've worked with a great VP of Engineering, you will never go back. So many folks today are like, oh, I'll be the VP of Product forever. I don't need someone that is working on a pixel in Gmail. Understood. Have you ever worked with a great VP of Product that could walk into an enterprise customer and make that workflow work and close that six-figure deal with you? Once you have, you've worked with an amazing one. Have you worked with a VP of Product that went out and in his first two weeks met with 50 customers and came back with 10 insights you didn't know about your customers? You probably haven't. I have. Then you'll want that VP of Product. Same with marketing, and it is true with VP of Sales. If you are burnt, if you made two miss hires and you're a little bit broken like Andy in that story, like many of us are, and you don't want to— you don't want to get off the floor and you want to stay in founder mode, trust me, there are the ambitious out there. Go find them. You will find them. There are the ambitious. Your product— yeah, okay, maybe you do some weird regulatory thing for wastewater management, or maybe you do some weird, really weird part of defense security, or really weird part of the tech stack that people aren't interested. Maybe you're doing advanced Fortran integrations and you think you can't find anybody to do this. You will find somebody. You will find somebody if you're tenacious that loves it. Your product is, you're not that special, your product isn't that special, your moment, the way you're bringing these elements together, very few things in software are new. You will find your person, keep hunting. So those are my 10, thank you. And we can take 5 minutes of questions, so thank you. Thank you. Could you talk about your, your, your motion for hiring a sales leader, recruiting team interviews, all that? Well, look, the answer is do everything. I think the most important— listen, the most important conceit in hiring for any position, but any VP position, no matter what, you got to do two things. You got to do two things no matter what. You gotta interview 30. Not pretend to interview 30. Not claim you're gonna interview 30. You gotta interview 30. And you, in general, you should spend at least 20% of your time as founders recruiting, but you gotta interview one a week. You gotta interview one a week. One, if nothing else, recruit one VP of Sales, meet, interview one a week. Every friggin' week. After 12 weeks, maybe you haven't hit the 30 you're supposed to, do, but don't ever let a week go. Sorry, I don't know, trying to make some eye contact with whoever asked the question. Don't ever let a week go without meeting the VP for that position. Don't ever let a week go. And you might be like, ah, I don't know, I don't know, I don't know if I want to meet Lauren or not. Here's the thing, and this is actually the same way to work with VCs. Even if you don't want to meet with VCs, meet with one a week and just pick the best this week. Listen, if, you know, if whomever, if Marc Andreessen doesn't want to meet this week, right, and you're stuck with Lemkin or Christoph Jantz, but that's the best idea of the week, just take that meeting. It's the same is true with VPs of Sales. At least take one. Like, you're like, I don't know if I want to meet with Joe. Like, I know, I know Jason said he was good, but he doesn't look right. What's your better idea this week? I don't have one. Then spend 40 minutes doing this interview. Don't do all the follow-up. End it nicely after half an hour, but force yourself to do one a week. That's the single most important thing. And the second thing is, what do you should you do? Should you work your own network? Should you work recruiters? Should you do contingent recruiting? Should you work— what's the answer? Is yes, all of them. Go to CRO poker night tomorrow night. There's a reason we're putting together 100 CROs and CEOs. Try a recruiter you're not sure of. Try a crazy recruiter. Try one that you know isn't gonna work, that your board recommends, that's super expensive. Yes, all of them. Scorched earth perspective. None of us have a good enough network personally, and you just don't know where someone's going to hunt that gem. So my answer is to what channel is all of them and one a week, whatever it takes, one a week. And don't not take the meeting just because you don't have a great one. That'll force you. So thanks for the question.

Yeah. Yeah. Thanks for amazing talk. What great VP of Sales should do in the first 3 months? And that's you.

Look, 3 things. Know the product cold. Meet with customers and know the product cold in the first 3 weeks. Brought on at least 2 folks to the sales team that are better than you have. Not— that you know are better than you have. Recruiting 2 people. And 3, first 90 days, they have to have tilted the curve. This is an old SaaS master point that is as true today as it ever was. Folks used to argue this in the old days. I don't know any CRO or VP of Sales that argues this anymore. In the first 90 days, something has to get better. Do they have to have tripled sales? No, that's not always possible, right? But sales has to have gone up a bit. Things have to have gotten a little bit better. And a lot of folks will say, "Hey, no, no, no, you got to give Jim more time." In 90 days, how could he increase Sales are sales cycles, 91 days. Okay, fair point. But do you have any deals in the pipeline at all? Yeah, we have 6 deals. Okay, so those ones are going to close before day 91, correct? Yes. Of those 6 deals, how are they looking? Well, one looks good, 3 are iffy, and 2 are— 2 are struggling. You know what Jim will do? He will increase the odds those 6 deals close. He will be better than you, which is a high bar. And because he is better than you, just the stuff that's in the funnel, more of it will close and revenue will go up. Or even Jim isn't better at you, but he's better at working with procurement. You know, he's better at asking for money. You know, he's better at next steps. Not better at anything else, but at least he never lets a meeting go by without next steps. All those deals that are at the end, he always has a next step. How can we get this done in September? What can I do for you? So how can I help you? I want to roll out on October 1st for you. I have bandwidth to roll this out personally. I will make sure your deployment is the best in the world. I have time the first week of October personally to do your deployment if you close by September 30th. That might work, right? Always a new head of sales can impact what's in the pipeline. Can they put more stuff in? Sometimes yes, sometimes no, right? But they can pull stuff in and increase the odds. And 90 days is always enough, and it's really 60, but 90. So thank you, Jason. Those are 10 slides of truth.

I guess Jason's 10 Commandments, we followed them.

Okay, good.

You were right.

At least one. All 10.

You were right. What is next for the CEO and founder now that that VP sales is locked in?

Sales is growing. Yeah. What's the right balance coming into deals, being involved in strategy?

What's next?

Well, how much should the CEO be involved in sales effort? The simple answer is, look, actually most, believe it or not, most VPs of sales haven't, are not initially equipped to answer this question just because it's rare they've been afforded this, but ask them how much of, not what quota, but how much of a quota do you want from me? And I would offer them, I would start, and if they don't have the answer, start with 10. Listen, I'm going to join 10 meetings a month. You can use it. Your SDR, your brand new SDR can use it if you think that's a good idea. Your right-hand person can use it. I'm giving you 10 chips. Okay? 10 chips. 10 is nice for a bunch of reasons, especially because it's more than 2 a week. So it makes people take it seriously. I got 10 chips. I want you to use them all. And every time we meet in our one-on-one, which I think you should to do. Just tell me where you want— what do you want me to do next week? I work for you and you have 10 chips and let's make sure we use them. And I'm willing to do 3 in person and 7 on Zoom or 5 and 5. It's great if some are in person because it pressures them, but give them 10 chips. And that's a great way to start it. The best teams, especially the best enterprise teams, you'll hear some version of this chip story where a VP of sales will get on stage to say, I gave, you know, I gave my CEO a quota. And it becomes common, but most haven't been afforded that luxury in the past. So give them 10 chips a month, 10 meetings, and if they're really good, they'll distribute it to their team. So thanks for the question. I think we might have 10 more minutes even though we're over, if anyone has any other questions. Oh, go ahead. So thank you, we're in the process of hiring now, so this is very helpful. VP of Sales, come see me. The question I have is related to point number 8 around a stretch higher. So I, the point, everything I was up, I was with you until the third part was like, they have to have hired before. Yeah. But what is your thoughts on seeing if it's worked around battlefield promotions where you have a VP of sales just gets completely let go? There's a really strong account executive that's been there a while, has been there as the team has grown, and it's like their chance.

Yeah.

And the odds are they'll leave if you jump over them. Is it worth risking them leaving and not hiring them, or is it truly a It has to be they've hired before. I think, I think, I actually think there are two different points. Okay. I think when the VP of sales blows up, 50% chance your best solution is already in the room. Look around the room. Who's really stepped up? And it may— it's often an IC. It's often an individual contributor. And they— you should promote them. You should promote them that week. Okay. I know it's not in sales, but Amelia, who runs all of Saastr, does all of this. She's somehow— she stayed 6 years. She's gone from marketing manager to running the whole thing. When her boss imploded after 5 months, she stepped up immediately and said, I'll just do it all. I wasn't even sure who she was, even though we're a small team. It's a funny story, but it's actually true, right? Instant promotion to director, VP, SVP, now the boss. So that's more in ops and marketing, but same You got her. I promoted her that day. Sat down. I said, I know we've actually— I know we're only 10 people at SaaS and I've never worked with you before, which is kind of weird because there's a weird dynamic. You're promoted today. Battlefield right now. So you got to do it. Does that mean they're your VP of Sales and can recruit? No. You got to say, listen, you promote the person that day and you say, look, we've got to bring a couple of great folks onto the team. I don't know if you can recruit. I want I want you here. I'm doubling your equity. I'm giving you this title. I want— I love you. Let's see. Spend 30 days and bring someone good onto the team. Spend 30 days. I will tell you, the majority of the time they can't. But be honest. Give them their shot and start recruiting, but keep it tight on 30 days. And when they can't, then kick off your full search, but already start that day. So I think they're different. They're different. They're related, but they're different. Thank you. Yeah. Okay. Jason M. Lemkin. So, sorry, one of the things I was interested in is when you get to that point, you've got 2 or 3 shortlisted candidates, and as part of the due diligence process and assessing them, are there any specific psychometric tests or any other tests that you should bring into the process so that you're increasing your likelihood of making the right selection? I don't know about any of these psychology tests that people do. I do think have them do homework, right? Have them do a real plan, go through it. Folks are still skipping these plans or they're not doing it for real. I think that helps if you have a 3. What would you expect in that plan? What, like, what would actually have them— or you know what, I don't do this, but the best founders do case studies. Here's a case study. We're trying to close Google Cloud for $1 million. Our biggest deal today is $80K. Here are our competitor, Drata, or whomever that's here. They have all these advantages over us. We only have two things going for us. How are we going to win the deal? Give them each a case study, right? I love the analytical founders do this case study. It does work. Not only do you learn from them, but the lazy people barely do it. Barely, barely do it. So do the next step of diligence. I will say at the end of the day, if you've really gotten it to 3 candidates and you can't decide between 3, I think it's an illusion. I think one has already stood out. Right. I think you need help. If you're not sure of 3, find your best mentor, find the best sales exec you you know on planet Earth and ask him or her to interview those 3. Because something's off if you think they're all equal. It's good that you got to 3, but it's rare. You haven't made the hire. You don't know exactly what you're looking for with the 3, and so get help. Right. Fantastic.

Thank you.

Yeah, thank you.

Jason, amazing talk. I have a question. So we are a self-serve MPOG product. We are at 1 million in in ARR and growing at 30% month over month.

So currently the challenge— I'm in. I'm in. That's enough.

Sorry. The challenge we are running is that I'm a nerdy person, and most of our products are like— the revenue is 70% from individuals. And now we're trying to expand to enterprise. So currently I current a few enterprise deals, and we have no salesperson at the company. So should I directly go with a VP of Sales, or I should go with like 2 reps hitting their quota and then the VP of Sales?

Well, look, if you're growing at that pace, you can afford to hire a VP of Sales, not just financially, but there's enough going on that there's stuff for them to do, right? All your motion self-serve, you call it PLG, but let's call it self-serve.

Right? For all—

it's really, that's the thing. So there's enough— your VP of Sales can come in and just work on a segment of the business, right? There's enough, there's enough that from an org chart perspective, you could afford the hire today. So if you find someone that you truly love and you have the kind of velocity you have, don't think— when you make VP hires, don't think about where you are today. Think about where you're gonna be in 9 to 12 months. So if you're growing at at that rate and you're going to be at $5 million in 12 months, you do kind of want to hire $5 million ARR people, don't you? $5 to $8 million. You don't want to hire $1 million ARR. So you're right. So you're ready because you can have a $5 million ARR mindset. I certainly have had experience where it's a VP, but it's a stretch, comes in and there's enough raw materials that you're ready to go. I think you're ready to go, but I wouldn't— the The problem you're going to have is you're going to hire Mr. Paratrooper, Mr. Datadog. Okay? You're going to— your metrics will attract someone that doesn't want to sell themselves or doesn't want to do the work themselves. You're going to attract the wrong type of character. Very, very, very good-looking LinkedIn. So you have to be very careful. But it's almost TMI. If you can find the up-and-comer to be a VP, I would actually just do it with your metrics because if they're creative smart and good, then you let them figure it out. But you need this creative pirate romantic, not a process block and tackler. But then I would aim higher. I would absolutely— the traditional structure is founder-led, hire 2 reps, and then get 2 reps to hit quota, and then you have 2, and then your VP of Sales gets you from 3 to 300. But when you have a million plus in self-serve, it's a different— they're trying to build out a segment. I think I think you can take some risks but skip that step. But you gotta believe. They gotta be really hands-on. And they have to hold the bag. Here's the last point. They have to close the first 20, 30 customers themselves. Ask them. Good news is, I'm making the VP of sales. Bad news is, you're the only person the first 90 days. Try that test. If they pass the test, hire them.

Thank you. Made the answer. Yeah, yeah.

Jason. Oh yeah, hi. Hi. So I was promoted from within. I was the gamble that our CEO made by promoting an individual contributor. Congratulations. And you didn't quit? I didn't quit. No, good. Thank you. And I've made it past some of the milestones that you mentioned, including hiring and firing a team. I'm curious, from your point of view, what's my biggest risk? How do I de-risk the choice that they made to promote within, since I don't have that traditional outside leadership. How big is your team now? I'm managing a team of 7 salespeople. And what's your, what's your deal size? $12,000 to $25,000. Okay, well, that, that's, that's still a fairly sophisticated sale, probably, right? Multiple stakeholders, right? Look, 2 things. First First of all, I would say just statistically, the lower the ACV, the further a stretch hire can go. And the reason is you get so many at-bats. Like, let's say you have a 2-call close, a 1-week close. Yeah, maybe you haven't done it before, but by the end of 2 years, you've just closed so many deals, right? So, like, Jameson on our old team, who was the SVP Sales at Gong, now he He's the SVP of International at Rippling. He'll be here tomorrow. He was the first salesperson at Gong and went all the way up to SVP, even though they hired a bunch of CROs and stuff. How did he do it? Well, one, he was great, right? Natural talent. But two, Gong started off with a pretty low deal size and pretty simple product in the beginning. So he got so many reps, and by two, he went from individual contributor to director to CRO. You can look at his, looked up his resume on LinkedIn, you can see this linear progression. It's harder to do in the enterprise because you don't get enough at-bats to go from the kid to the top, right? But I can't, there's so many examples of public company leaders where that top AE with a lot, in a high-velocity motion, 7 years later is running the place, even at IPO, even though the company's totally different, okay? So you're not that, but you might be close enough that you can make it. So, but, okay, so that's number one. It helps to have a lot of at-bats. Because you, you've— sorry, you've been doing this like 2 years in this leadership role, or a year and a half, you said? How long? I'm 90 days into the leadership role. But how long have you been at the company? 5 years. Okay, so I'm gonna guess of everyone on the sales team, you're the biggest product expert, correct?

Yes.

They'll never hire anyone better than you at product, so lean into that. Okay, so next point. So you're in, you are indispensable at that deal size, that motion, so stay. This is the most most important thing as you grow. It's not important today, but it's going to be important over the next 24 months. You're going to have to hire a leader under you or two that is better, better and more experienced. This is the toughest thing for— this is where stretch hires break. First, they can't hire the 2 reps, right? Because they've never done it before. You figure that out, you got 7, okay? They're good. Then here's where they stumble. They're like, I'm a little intimidated, I'm a little uncomfortable in my position, I've never I'm gonna hire this director from big tech company to manage my team. Doesn't work. You know it doesn't work, right? Or sorry, let me take it back. That's the mistake. I'm getting a little tired. I have a lot of energy. The bigger mistake they make is, I'm gonna hire this kid, 'cause she'll work for me. I'm a little uneasy. I'm a little uncomfortable as a new manager. I'm a new director or VP. I'm a little nervous. I don't think I've really earned it. I have some imposter syndrome. Imposter syndrome. I still have imposter syndrome, by the way. But you have, you probably have some imposter syndrome, right? 95% of us does. So you hire not the best, but you hire who will work for you as a manager, and you hire mediocre managers. I see this again and again. The first-timer hires these, because they can't get anybody better. They can't get anybody better. And whenever I meet with a stretch head of sales like this, that especially when they're on a rocket because when they're hypergrowth, there's not a lot of time. And the first thing I tell them is the number one most important job is hiring— for you it'll be one— hire two VPs under you, or two directors that are clearly better than you. And they are not— you know why they're not a threat to you if they're better than you? Because you are the guru of the product. These directors, you have 5 years under your belt. There is no way if they're better than you, they will ever know the product better than you. They will never know why we won this deal 3 years ago. They will never know exactly the really clever way you beat the competition even though you're feature poor. You will always be better than them at this nexus of product and sales. So you should not be threatened by 2 VPs or directors under you that are— Do not hire anyone that's not better than you as a manager. That's my number one bit of advice. Awesome. Thanks for the advice, Jason.

Thank you.

All right, maybe just 3 more minutes. Do we have any? Are we out?

Oh, we're out.

One more, two more.

Okay, when you say they have to know the product before hiring them, yes, what do you expect? Like, of course I can—

I expect a lot. I keep going with the question. That's the answer. And listen, I know it sounds like a big ask, but slow it down for a minute. And if you— again, and I do know— I don't know anybody that does this except me. You can do it after you give them an offer. Offer letter. You can give them an offer letter signed and tell them not to countersign until they know the product cold. Like, this is the extreme versions, so that you're not asking them to like— I mean, I think it's a reasonable ask, but you're asking them only to go so far until they have an offer, right? But they're gonna spend 90 days on the clock learning your product? That's bad for them. They're gonna fail. It's not a game, right? Again, The world is loaded now with participation points and everything. It's not— this is sales is, you know, sales is— I wrote this up the other day. I talked with the sales executive. I don't know why I talked with this person. They got fired after 6 months and never closed a deal. But they complained that they built a lot of pipeline and that they had 6 deals out for signature. They closed nothing. They wanted participation points for sending deals out for signature that didn't get signed. Right. So learn the friggin product. But they can do it. Pay them to do it. They can do it on the clock. And now you're gonna feel like, well, they have other offers and they have this. Then let them go. Let them go. All right, one last question, or are we done? Good. Okay, sorry, one more. Thank you, Jason M. Lemkin. My name is Pian Pian, founder and CEO of Emotions, an AI coaching tool to reduce sales teams' run-up time. Curious, like, you talked about hiring VP of Sales, but when would When should the founder hire the first salesperson? And then how many salespeople you need before getting the VP of sales? Look, it's pretty— we all come to slightly different answers. At the end of the day, I know this is really basic SaaS stuff. Close the first 10 customers at a minimum yourself. Close 10. 10 is statistically significant. If you can close 10, if your deal size is low, it might be 50 or 100. If your deal size— but close 10. And then you will have seen all the issues. You will know them. You'll have gone into battle. You're ready to hire your right-hand man to help you sell. You're ready to hire an individual contributor. And then when you do, it's an old SaaS or post that is true today as ever. Hire two, because if you only hire one, you'll never know why they're good. Hire two. They're not that expensive. Hire two with you after you close 10. And then once they hit— once they're both performing, 2 humans are performing, then you're ready to hire their boss. But you can't hire a VP of Sales. The VP of Sales job is not to start the engine going, it's to make it go faster. And you need 2 reps hitting quota with the beginning of a playbook, with a reason. And they come in and they, they figure out what these 2 do and they clone it and they make it better and they hire 3 $300,000. But if you hire a head of sales before you have 2 quota-hitting reps, it can happen once in a while if you have like this massive PLG motion. But 95% of time it's just a train wreck. You're asking them to create product market fit. A VP of sales job is not to create market fit. It is to scale, even if it's just from $1 million in revenue, $2 million, $500,000. Their job is to scale, not to be the pioneers in sales. That's their— that's to catch you in the first 2 reps, not to be the pioneer. But, all right. I think we're over time. Thank you, everybody. Appreciate it.