Live from SaaStr Europa 2022: The Personnel and Process You Need to Scale with Next47

Please welcome partner at Next47, Micah Schmertway, and early-stage investor at Crane Venture Partners, Morgan Zareth.

Hey everyone, we are— thank you. Morgan and I are both venture investors in London, but what's unique about our background is that we were both salespeople at high-growth startups prior to venture. In my case, I was the first sales hire at a company called Cloudflare. I joined when there was 30 engineers. I saw the high growth from a million to over $100 million. Today the stock trades at around $20 billion. And what we— the goal for this talk is for us to share with you some of the lessons that we learned along the way. While at the end we had success, there was a lot of mistakes along the way that we hope that we can help you avoid. Now I'm at a venture firm called Next47. We invest in B2B startups and all Series A to C. And I'm Morgane.

I'm also an ex-sales turned VC. I was super lucky to join my previous company called Tessian as the first sales hire as well, and I was lucky enough to help them grow from no revenue to $25 million ARR in a few years. And this is when I became super passionate about building go-to-market, like putting together those like first few go-to-market bricks to make a company successful. And so this is for this reason that I joined Crane last year as an investor, because I wanted to share my knowledge with more and more founders and try and help them, guide them, and avoid, like help them avoid some mistakes, hopefully. And today I'm with Crane. It's a seed fund, super thematic. We love enterprise B2B SaaS and dev tools. So basically anything geeky, I would say. And we have roughly 10 minutes today. So we're going to share hopefully one tip per minute and we really hope it's going to help you and our mistakes are going to help you guys.

So the first tip is on actually who to hire for your first sales hire. This is a critical hire to make. This person will set the cultural tone. This person will set the best practices, and they will be responsible for setting up each subsequent new hire for success. The framework I like here is hiring a missionary or mercenary. A missionary is someone who is mission-driven. They are clever, they'll run experiments, they build the machine. The mercenary is someone who comes from a large organization. They are good at turning the crank in a machine and they're good at operational excellence, but they're driven by things like hitting the President's Club, crushing your quota. And the common thread to every mishire that I made in an early-stage team was I brought on a mercenary into an early-stage organization. And what would often happen is I would be seduced by the logos on their resume and I would think, wow, They're at Google or Salesforce and they're going to teach us how the pros do it. But what would happen is they would join and say, hey, where are my training videos and where's marketing to help me with a webinar? And say, hey, you got to build all that stuff. So here's a credit card. Go walk to the Apple Store, buy a laptop, come back and we'll build your IKEA desk together. People who are good in a resource-rich environment may not be used to operating well in a resource-constrained environment. And one of the key ways to tease out who's a missionary and who's a mercenary, if you hear in the interview someone saying, how many people, how many salespeople are going to make $1 million this year? You know you found your mercenary.

And it brings me to our second tip, which is to look for grit and hunger. So whenever you start thinking hiring, you need to start thinking of building a scorecard of like what your ideal candidate profile looks like. And just like out of curiosity, because I know a lot of founders don't do it, and like we're really trying to help them do it. Out of curiosity, like who is doing this and who knows what a scorecard is, at least for hiring? Raise your hand. So a few hands. But yeah, come to us in the end if you want to have a template for a scorecard. Because this is literally how we're helping our founders hire the best people. So a scorecard is a simple document where you map out basically what your ideal candidate looks like. And usually when we think of scorecard, we think, okay, skills. I want those skills in my candidates. Well, in the early days, it's especially true that we need to go beyond the skills. We need to look for traits and behaviors. And I learned the hard way that there is one behavior that you can't teach and you can't train. It's great, and how hungry your people are. And this is something that's not necessarily easy to tease out in an interview. But basically what you need to understand is why they're crazy enough to join you on this crazy ride and like have a relentless ride, and they give up their well-paid job to join you, founder. And so you can ask questions around their motivations. Like it's super important for you to be peeling the layers of their drivers and their motivations for like why they want to join you. Are they also courageous enough? Are they relentless enough? Do they embrace failure or are they running away if they feel that they will be failing? These are like tiny things that you can test out in the interview. And I would say that it's actually the most important thing for your first few hires if you are looking for someone who will be successful with you along the ride.

And think of all the things you need in a large-scale sales org. Consider sales org design when you need segmentation, process, job design, coverage, compensation, management cadence, systems. All the things you need when you're big, you don't really need when you're small. Think about it. If you have 3 sales reps, does a leaderboard make much sense or a president's club? The— what you are trying to design in an early-stage team, the key principle is knowledge share. You want everybody running experiments, so you want this divergent thinking, but you want to make sure that there's convergent thinking and everyone is sharing the results of those experiments ubiquitously. Different messaging to a different persona with a different sales deck. Now you hope that you hire team players, but unfortunately all of us have worked with people who aren't as collaborative and are more competitive. So one thing you can do in comp design early is a team goal. Now, most salespeople would look at this and say, "No, it's eat what you kill." But early on, a team goal puts a financial incentive behind sharing knowledge. Now, that will break over time. There will be a free rider problem. The top performer's compensation will be weighed down by the bottom performer. But early on, it's a way to crystallize this culture of truly sharing knowledge. And that is how process is built. You run experiments, you figure out what works, you codify it, and now that becomes a play. So think, don't be tempted to bring large-scale sales org best practices into an early-stage sales team because often it doesn't fit. Good.

Tip number 4 is about simplicity. In the early days, it's crucial to keep things as simple as possible. We know that— well, we know and you know that we're all super ambitious and in the end we want to scale a business. And if we don't manage to scale it, we won't be successful. But in the very early days, it's super simple to think simplicity and to think growing, to think about growing instead of scaling. So you need to be obsessed with your customers, getting your first few customers in in a simple and neat way for them instead of like trying to build those like very sophisticated processes that will basically overcomplicate everything and make you literally get lost in your processes. So don't try and get to build something perfect from day one because in any case it's going to change dozens of times along the way. So just like get to basics. So for example, if your sales process is a 3-step sales process super basic, keep it that way. Just go with it and iterate because it's going to change anyway. And don't try and make it scalable from day one. You don't care about that. What you care about is growth and making your first few customers super happy.

So now you get to $10 million in revenue. You're ready to pour gas on the fire and scale. And the question is, the first strategic question is, where do you scale to? Do you scale internationally? Do you scale to new channels? You get a reseller who could be a sales force multiplier for you, or do you sell into a new vertical? And the big mistake that you can make here is you push into one of those areas instead of being pulled into one of those areas. And what I mean by that is it's very easy to get an Excel sheet and do an MBA-style analysis and say, which TAM is the biggest and should we go to? If we were all part of a sales team in Spain today, We said, okay, what market do we go to first? Okay, UK, France, Germany, big markets. Let's open an office there. But let's say we have a couple customers in Portugal. Well, we should be open to the idea of establishing presence in Portugal because we'll get pulled in there. You can build heat around those early customers. If those early customers are part of a multinational corporation, they can be useful nodes to to get introduced to other countries. And if you push into a market, you're flying blind. You don't know what the friction will be. It could be cultural, it could be regulatory, but if you already have landed a couple of customers somewhere, whether that's a channel reseller, whether that's a geography, pull that thread further and use that as the first step towards scaling.

And Mika said it, Mika said it, sorry. We can't live in spreadsheets. Some people do, and some people sometimes are investors. They live in spreadsheets, especially when it comes to later stages. Like, when they look at your business, it's numbers. The thing is, and I've learned it again the hard way,