The Playbook to Hiring Your First VP of Sales -- and Not Screwing it Up | SaaStr Software Community

Hey everybody, how you doing? So the title of my presentation is The Playbook to Hiring Your First VP of Sales and Not Screwing It Up. Um, I do this literally every day with a wide, wide range of clients, sort of helping them in and around hiring a VP of Sales, maybe replacing a VP of Sales. So this is kind of what I do. I'll toggle sort of between the, the founder perspective of hiring a VP of Sales as well as a first-time, uh, or, uh, somebody that wants to become a first-time VP of Sales. A little bit about me, I was the 15th employee for LinkedIn. And their first head of sales, uh, joining the company back in late 2005 when everybody thought it was a spam company. Um, was the 10th employee and VP of sales for EchoSign. So I worked for Jason M. Lemkin for about 6 years, half of which was EchoSign, the other half of which was Adobe post-acquisition. So I wanted to get the experience of working for a Fortune 500 tech company. So I got 2.5 years of that, and that'll likely be the last of that. Um, 5th employee and VP of Sales for Talkdesk, which was recently evaluated at $2 billion. I was their first employee in the United States. And so I consult and advise for startups, about 35 startups over the last 3, 3.5 years. Well, so talking about hiring your first VP of Sales is, is obviously Everybody knows the stat about what percentage of startups fail. Anybody want to share that? What percentage of startups ultimately will not make it? Anyone? 95%. 90%, roughly 90%. Roughly about 8 out of 10 first VP of sales hires for startups will also fail, right? So, and they will also sort of average tenure is about 11 months. So, if you get it wrong, the consequences are essentially you're going to lose 1 year of your startup life. For most startups, that's the difference between life or death. You don't get to have a mulligan on that year. Irregardless of that, the trajectory of your company is forever changed, right? So, you look at companies, top 10 SaaS companies in history, You know, none of those companies got their first VP of Sales wrong. So the consequences are tangible. If you're a CEO and you want to pull the trigger, so if you got your first VP of Sales wrong and you want to pull the ripcord after 3 months, and that's certainly something that I've advised, that's something that Jason M. Lemkin advises, but the reality is there's political consequences either way. If you hold on to them too long, that's a year of your life. If you pull the ripcord after 3 months, that's a lot of capital with your investors you may not be able to get back. So, it's just not a scenario that you really want to find yourself in. And again, you lose confidence in your investors and your board, and that's a level of loss control early on that's not ideal for a founder. So I wanted to just kind of put some sort of concrete, simple steps together that I'm pretty sure are right. It doesn't mean that it's going to reduce your risk to zero, but if you can take an 80% chance of failure and reduce it to 20%, it's about as good as you can hope for. So step 1 is find a friend. So oftentimes a founder or CEO sort of has 2 primary influences when they're running this search. One is on the investor side, 2 is on the retained or the executive search side. And the reality is, is both of those parties have an agenda, right? Which is to get somebody in place and check that box as fast as possible. For you, there's really no reason to rush here, okay? I'm assuming you're running a VP of Sales search because you've had some level of success and you want to double down on that or capitalize on that. So for you, find somebody— so it could be anybody. You can come up to me after this and I can give you a list of 10 people. But find somebody that's been a VP of sales before, successfully, in a startup. Scale that to some level of success and make that person sort of an independent arbiter of that process. They don't have an agenda. You're probably going to get— maybe give them some shares and an advisor. You may pay them, but the reality is, is they're going to be somebody that's going to be your safety net through the course of that search. Okay, so have an objective voice with experience. Without it, you're likely to make a mistake. Step 2: Define your ideal candidate. So I have a process, sort of a checklist. Obviously, the— at the top of the list is somebody that's been in a startup been successful, scaled, maybe had one exit, maybe had more than one. That's your ideal, that's your ideal profile. Acceptable profile, someone that's been a proven success building through your stage and is ready to go beyond. Less acceptable is somebody that's been a number two. Sorry, somebody that's been a number two, so somebody that has been a right hand to a VP of sales that's taken a company from 0 to 50 or 0 to 100. And then last resort is somebody out of a big company like Salesforce or Oracle, um, again for all the reasons that have been stated before. But those are people that, generally speaking, are not going to be comfortable walking into a scenario without any brand, without customers, without potentially even a pitch and a message. So I would avoid that. At all costs, generally. Okay, uh, one of the mistakes— I think two of the mistakes actually that I see a lot of founders make is they tend to aim high, too high or too low. So they come out and they say, you know, it's sort of manifest destiny that, you know, somebody that— my magical dream candidate that scaled company X, Y, or Z from 0 to 50 or 0 to 100 is going to come off the beach and stop whatever they're doing, which is probably not much except golf, um, and jump back in and take a risk to build your company. Uh, it's not going to happen most of the time. Okay, um, I can give you 20 people that I would identify as like, here are your perfect first VP of Sales hires, and you're probably going to miss on all 20. And if you want to land one, it's going to take a long time. You can't just start today, right? So a lot of times this is a very, very long game. The best recruiters that end up with getting the best VPs of Sales do it over 6 months, a year, sometimes more than that. And again, unless you have time, that's probably not going to work. So the odds of landing your dream candidate are low. Identify sort of the next level down, but you should shoot high, right? So when you talk about whether that's Jim Erbold from Box, Matt Cooley from Quip, a lot of these people are probably unrecruitable, but you should meet them, right? And you should prepare for a long process potentially to make this hire. I would say don't make the hire, then make the wrong hire. So if you need to wait longer, if you need to prepare your board for a longer process, don't just check the box because the board told you to. Don't just check the box because the retained search firm wants to get the second half of their payment. You take as long as you need, and in my opinion, no hire is better than the wrong hire. So aim high, aim low, aim in the middle, but you should be talking to all those levels in parallel. Step 4, and this is really for me, this is kind of a mandatory deal. Who's coming with them? So one of the first VPs of sales I had in my career had this incredible resume. See, well, at that time thought that was an incredible resume, but Siebel, Oracle, all these companies. Um, nice guy, love to drink Maker's Mark, super social, all that stuff. And I noticed that every time we were looking to build the team or hire people, he was always asking me, hey, you know anybody we can hire? You know, and I was at that point, you know, 26. I didn't really have much of a network at that point. And I kept coming back to the point of like, why does nobody want to work for you, right? You've been doing this for like 20 years. You worked in all these companies. And yet not a single person that ever worked for you in the past wants to come with you. Um, and there was a reason why, right? As he was somebody that, that managed and led teams sort of with a me-first attitude, right? He was looking to, um, raise and shine his own star over his team. So who's coming with them is a huge, uh, huge factor for me. You're not just vetting the candidate, but you're also vetting the people that they would potentially bring with them. If they're not comfortable sharing that, and again, there's, you know, there's certain rules and ethics involved here. If somebody's going to give you the names of 4 or 5 people they want to recruit, but then you're not going to hire them, but then you're going to go recruit their people even after you've turned them down, I don't really consider that to be a super ethical process. So if anybody does that, then I would say, hey, you got burned, maybe you don't do it again. But for me, you know, I'm not gonna, I'm not gonna violate that principle. So, um, who they're going to bring with them is critical. That them ideally even like interview them sort of in the process in parallel with the candidate, um, because for me, for a first-time VP of Sales, so say you're I don't want to say any— I don't know, what is a good age for a first-time VP of Sales these days? 28, 30? Um, I would hire somebody younger, less experienced, but they had 4 or 5 great people they could bring with them. I'd be willing to take that risk over maybe somebody much more experienced that had nobody they could bring with them. So that's how big a factor it is. I've sort of been advocating for this for a while, and I see more and more founders and CEOs that are adopting this as a standard part of their process. Okay, why does it matter if they're bringing their own people with them? Well, because it's an advantage for you. These are foundational hires. These are people that are going to help set the culture and set the values for a VP of Sales. And again, you're looking to make as many low-drama hires as you can as a VP of Sales walking into a startup, people that can come in and contribute immediately people that can not just from a numbers standpoint but from a culture and mentoring standpoint. So if you don't have any of those people, you're immediately on a level playing field with everybody else, right? You're recruiting on the merits of whatever your company does, whatever the pitch or whatever the buzz is. But that's really— it's tough to stand out in the recruiting process there, and the quality of the people you hire will probably be reflective of that. Talked about before, don't panic. I used to be a proponent of make the hire, make the hire, give it 3 months, if it doesn't work, pull the ripcord. We talked a little bit about that earlier, right, and talking about the political capital you lose as a founder. So I've become a bigger believer in, hey, like, assuming you're doing something well and doing something right, you have somebody that's managing or leading your team. Maybe you stick with that for a while instead of making the wrong hire. And quite frankly, most of the time when a startup hires a VP of Sales, it's the wrong hire. Everybody knows, right? Everybody knows. All the employees know, all the salespeople know, potentially even the board knows. But hey, check that box. So do nothing. Maybe you have somebody in there, maybe you can promote from within. Right, maybe you have somebody, a manager that could be a director, a director that could be a head of, or maybe even a head of that could be a VP of Sales. Um, but make the absolute right hire. And if you don't have the right person, if you have doubts and there's doubts within the team on that decision, just don't do it. Okay. So I guess that's the main portion of the slide piece. Um, happy to open the floor to any questions anyone has, um, on the hiring process, or anyone that wants to be a VP of Sales, anybody who wants an introduction to other people that can help you or help advise you in your search. Uh, yeah, go ahead. What are some of the most important characteristics that goes beyond experience? I would say somebody that— you got to have a fighter on some level, right? The odds are so stacked against you. You have to— you can't— it's not just that you're a fighter, it's that you like the fight because there's, you know, there are going to be ups and downs, but there's going to be downs so low I've been through them myself where you go home and you're like, we should just close the company tomorrow, right? We're done. It is game over. And then you go home and it's like, this is something I've had throughout my career. I don't know why. It's like this, like, hey, you, you know, tend to your wounds for a few hours and then the next morning you wake up and you're thinking about solutions. How do I fix this? How do we flip the script? How do we change things in our favor? And that's what it takes, I think. I think, you know what, I'm not done with that answer. Gotta be a fighter. You have to be just a relentless recruiter. So recruiting all the time, recruiting even when you're not working. Quite frankly, when you don't have a job. My first job out of college was as a recruiter. And so that's just like the ultimate sort of, you know, you're always thinking about relationship building and you should be recruiting for your career, right? So you should be like, hey, I haven't had a full-time job in a couple years, right? I already know the team. If I were going to take a full-time job somewhere, I know exactly who I'm taking with me. And that's what you need to be doing. It's just relentless on that front. And that's not just recruiting, it's building your brand and establishing your brand and your company's brand. I think you have to be— you have to have no taste for politics. There's no place for politics and bureaucracy. It's like a pathological meritocracy, you know? It's like, I don't care what you did before. I don't give a shit, right? I don't— you may have been at Salesforce in '99, you may have been at Box in 2006, or LinkedIn in 2008. I don't care. Like, it's what can you do here today, now, for our company. And if you perform and you put the effort in and you show the values the company values, then you're moving up, or whatever it is that you want to do. Um, and, uh, yeah. Does that answer your question? Okay. All right. Go ahead. Yeah. Yeah, I blogged about this one a few times, so I can't even remember my own shit that I wrote sometimes, but, you know, I look— I want— Sorry. Yeah. Question is, what characteristics of a company are you looking for as a VP of sales? I think that's right. To evaluate. Yeah, I would say Find something interesting, right? Personally interesting that you're like, hey, that's interesting to me. If it's totally uninteresting, I don't know how you could do it for 4 years or 5 years. I can't. If it's uninteresting, I'm just, you know, who gives a shit, you know? Like, that's been done 20 times, you know? Um, so something interesting, something ambitious, uh, a founder that you truly like and truly respect is critical. I would say that's number one for me personally, which means I may never work full-time again. But finding a founder that you want to go invest 4 to 5 years of your life with and for, because it really is, you know, certainly there's other leaders and executives that come in, but if the VP of Sales and the founder CEO are not on the same page, It's not a good thing. From a revenue growth in the early stage Series A, like if you have a 1-to-1 sort of ARR to funding ratio, that's great. When I joined Talkdesk, I think it was like $3.5, $4 million to like $2 million. That's a really solid ratio early. Obviously, the more money you raise, more that ratio comes beyond 1:1. But that's— those are early good factors because, you know, the more money you raise and the lower your ARR is, the further behind the 8-ball you are as a startup, and you're constantly trying to make it up. And I've seen VP of Sales get swallowed up in like a founder's own lust to raise money on no revenue. It's not a good position to be in. Right? You want to have some solid fundamentals there. Um, can you recruit— can you recruit the team to that company, right? And that's all another good indicator of the people you know, the people that you're connected to that want to work for you or work with you. Can you bring them? Are they interested? If they're not interested, it's a little bit of a concern. Uh, uh, first question was a co-located VP of Sales. So I'm assuming startup in San Francisco with a VP of sales in Salt Lake, that type of deal? Yeah. Possible. Depends on what do you want to do in Salt Lake? Is Salt Lake, is that, do you have plans for Salt Lake City like beyond or at some certain type of scale? Certainly I think you see most scaling companies doing something outside the Bay Area, right? Utah. Phoenix, Rob Yallen over here has made famous as a startup hotbed of startup activity. Phoenix, Austin, you know, LA, I guess. I don't know, is LA a hub or is LA kind of like a, you know, I don't, I'm not sure what LA is yet. Yeah, I would say you can do it, but I would say more in a scenario in which you're doing pretty enterprisey upmarket scenarios where you want your VP of sales flying to your clients. For an inside sales model, it's obviously a total non-fit, right? Unless you're going to do something in that regional market at some point. What was the other question? Comp range in OTE as a function of your current revenue. Um, I mean, you're, you're You're gonna pay through the nose regardless for a good candidate. So I'm not sure there is any one rule around that. Let me think about that one, I'll get back to you. Go ahead. [Speaker] How do you know when to, you know, the challenge of topping an existing early employee that's in a sales function of sorts versus just promoting that early employee what, in your opinion, when is the right time to just promote that early employee into the VP of Sales versus topping them with an outside hire? Well, obviously it depends on how successful that internal person is. So, you know, they have to have you on some sort of trajectory that you want to be on. I don't think there's any doubt about that. They have to have proven that they can recruit and train and hire and onboard people. So, I mean, I'm a big believer of promote from within, but typically VP of Sales promoting sort of next-level people. I do think some companies definitely will top people too early. I think that's an epidemic, quite frankly. If you have a VP of Sales that took you from $1 to $15 million in 18 months, It's pretty good, right? Or even 24 months or even 36 months for that matter. And so, like, I think you should— they should be given the opportunity to take you from 1 to 20 and then from 20 to 50 or 20 to 40. And too often VP of Sales, often heavily influenced by the board. Yeah, that's great. We got our 1 to 20 guy. Let's go get our 20 to 50 gal. And I think it's a mistake. I think a lot of times it does more damage than good. I think most companies overcome it because they're already at $20 million, right? You're probably not going to be able to kill them. So I would say that's a leadership failure for a lot of CEOs, right? Because CEOs just sort of want to outsource the issue. Instead of saying, hey, like, here are the things I'm tasking or challenging you to do. This is how you need to grow with the company. This is what I want to see over the next 6 to 9 months. But they don't know how to process it and communicate it. So they just say, hey, let's go get somebody bigger. And the reality is, is like, you know, unless a lot of the things that you're still doing from 1 to 20, you're still doing a lot of those things from 20 to 40. It's a reality. You're doing more of those things than you're doing the things that the person you hired that's only done $250 million plus are going to be tasked to do. So I think I didn't answer your question. Uh, go ahead. My company is a very technical product. We sell engineering software, and it's a new category that we're creating like, uh, from scratch. And we've already made a mistake, uh, hiring our first VP of sales Any thoughts given that scenario on what characteristics you would look for? Yes. I don't know if anybody heard that. He talked about he's selling a product in the engineering space or to engineering as a buyer and already hired a VP of sales, already fired a VP of sales. What do I do now? New category. Doesn't exist. Doesn't exist. Got it. Okay, I would say what's going well? Here, let's put the mic up, let's have a back and forth. Engagement with the lower level kind of end user people. We're working, you know, we're getting better at selling up in the market, but really what's working well is my co-founder CEO leading the sale. Got it. Everyone else we've brought in as a sales leader has has just flopped. And he's very technical. He doesn't come from a business background, but he's strategic, you know. Yeah, I've seen this one. Still in founder-led sales. Seen it more than once. Um, yeah, so he's your CTO? CEO. CEO. Yeah. And it says, is he a technical background, you said? Yep. Okay. Um, and no salespeople currently performant in the company? Uh, we have a, we have a couple that are okay, but not, not VP material. No, no, but I mean from a like they're closing deals, they're scaling, and we have one besides the CEO who can close deals. Got it. Um, well, I mean, obviously I could say, uh, you know, open up another VP of Sales search and get your second person. Um, I mean, you're gonna have to do that obviously on some level. Um, you see, it's, it's not that uncommon for a CEO or a founder to, uh, stand in as sort of a surrogate VP of Sales for some period of time. Um, I don't know, is he a natural mentor and coach and all that kind of stuff? Um, but I would take the reps you have and shadow him as much as possible, bottle as much of what he does and says and knows as you can. Maybe a product like Gong is a good product for that, where you start recording and and transcribing and analyzing all your sales calls. I think Gong is one of the best sales enablement products I've seen come out over the last 5 years in this space. But that's what I would do is try and get those 2 reps you have on the level as much as possible if they're not. And then, you know, try and find, you know, where are you based? Berkeley, across the bridge. Maybe try and connect with some VPs of sales that have maybe sold in like the engineering space that can sort of act as advisors, surrogates, helpers for you. It's not free usually, but it's worth it. And see if maybe, you know, hey, like maybe I can tap into who they know. Like I'm trying to think of, you know, maybe somebody that was like early selling like GitHub or You know, so try and find a couple VPs that have sold into— sold to the buyer or into the market that you're trying to, and make them, you know, sort of give them some stake in the company, and they'll help, you know. And if they can't help, I don't know, you know, I don't know what the next step is. All right, go ahead. Uh, do you have any tips for CEOs? We've hired a VP of Sales recently. She's performing really well, but with characteristic of an effective VP of Sales comes a certain swagger, comes a certain, hey, I'm closing deals so I can do whatever I want, you know, this sort of, uh, impact on the culture. Um, definitely different management style required there as opposed to the rest of the team. So you're saying that she doesn't have the swagger you want? She does. Oh, she does. You know, it's great for sales, it's bad for culture. Got it. Um, is she a legitimate, like, VP of Sales? Has been a VP of Sales before? All that kind of stuff? Yeah. Yeah. Okay. At a successful company, I'm assuming? Yeah. Okay. I would tell them that that's not good for the culture, at a minimum. Sit her down and say, I'm assuming your company is probably just as many engineers, if not more, than salespeople? Yeah. No, I mean, we've tried the coaching, but the pushback we get is, I'm closing deals, I'm making revenue happen, so. I guess generally you don't want your— at some point you want your VP of Sales to be managing, building, coaching, and not closing deals, which should significantly maybe temper their ego a tiny bit. Um, so I would say, um, you know, hopefully there's people on the team working for her. Yeah, that makes sense. So, so, uh, that coach toward the leadership. Sure. Piece of it. Yeah, yeah. I mean, that's— it's great that she can close deals, but Obviously you hired her to build and run your sales organization, not be an enterprise AE, right? Yeah. Go ahead. Thanks. So I know it's a range based on stage of the company and experience of the salesperson, but can you give some ranges on total compensation expectations and kind of what the breakdown is between equity and base and commission or bonus? Yeah. So what's— What are the total comp ranges to expect to have to pay, essentially? Okay, I would say, I mean, it's loose, right? I mean, sometimes I hear of searches and you're like, oh my God, like, that can't be right, right? But I would say somewhere between $300,000 and $500,000 in total comp. Equity, I mean, I can tell you that— I can tell you the things that, uh, I would take a job for. But, um, yeah, I would say it's equity anywhere from 1 to 5% depending on the level of experience of the candidate. If you want to get, you know, a been there, done that, multiple exits, you know, reduce the risk as far as you can down the ladder type of hire, you're going to pay a heavy price on equity, and you're not going to get those people without it, period. So, okay, uh, any other questions anyone has out there? Yeah, comfortable with a new VP of Sales coming in and using an outside coach, so whether it's Brendan or someone else, but, uh, talk to me about that dynamic. What should our expectations be and what should we budget for? Yeah, um, yeah, I mean, I think it's, it's a good thing, you know. I mean, there's, you know, VP of Sales can be a pretty lonely job, even for, you know, working for a great CEO and with other great leaders. And the reality is, um, you know, they'll be judged on performance and their number. Um, and I think, you know, bringing somebody in as a coach or a consultant or advisor can help eliminate mistakes as a sounding board, right? Because you— there's so much creation happening in a startup, you know, that you're just— it's constantly like creation, iteration, beta test, back to the lab. You're doing it all the time. So having somebody that can sort of, you know, help guide them in their decision-making process, help tell them when they're about to, you know, drive over a cliff I think is a worthwhile investment. You know, that could be paid in stock and equity, that could be paid in cash, could be paid in both depending on how involved you want them with your company and with your VP of Sales. But I would totally recommend it, and not just because that's what I do for a living. I think that's it, everybody. Thank you very much. Thanks.