Graduate Master Session: Improving Your Sales Efficiency

Alright, and we're live. Hello everyone, I'm Mike Supravici. For those of you that don't know me, I run the Graduate Success Group here at the Foundry Institute, and I'm here with Doug Landis, who's gonna drop a lot of knowledge on everyone here in regards to sales and things like that. So if you don't mind, Doug, maybe you can— we can start out by you giving us a brief intro on yourself.

Yeah, of course. Thanks so much for having me, Mike and crew and everybody that's on the call. And happy almost Fourth of July. I'm kind of trying to get in the spirit of things right now. It's Friday, 9 o'clock, and it's supposed to get up to like 90 degrees today. So why not? So a little background. I am a growth partner at Emergence Capital. We're an early-stage Series A, Series B venture capital firm that focuses on investing in enterprise B2B SaaS companies. I've been with the firm about a year and a half, and I'll talk a little bit about my role in just a second. But previous to joining Emergence Capital, I was, and I think I still am at heart, an operator, right? I have been thinking, living, breathing, assessing, analyzing, talking about the world of sales and go-to-market my entire life. I spent, in the early days, I started off, you know, carrying a bag at Oracle where we had to be in the office at 5:30 in the morning. You SDRs, you think you have it hard? Damn, we had to wear a suit at 5:30 in the morning down at Redwood Shores. And if we didn't make 100 calls a day, we were on the list, like a printed out list. If you were below the line, man, you were in trouble. It was crazy. It was totally crazy. And then I was fortunate enough to go work at Google, running sales training and development, sales productivity. And then I went to Salesforce for 5 years and built the whole sales productivity program. And then after that, spent another 5 years at Box. So, yeah, that's a little bit about my background.

Great, great. And, you know, maybe we can talk a little bit about, you know, Emergence Capital as well and kind of what your role is there now.

Yeah, yeah, sure. So, you know, it's It's kind of interesting because as an operator, it's not often you think, look, I'm gonna jump ship and go on the other side of the table, unless you're thinking like, hey, I wanna invest. But for me specifically, I was helping out so many different startups already in my role, both at Box and Salesforce. When the opportunity came to work with Emergence, Emergence has only been focused on enterprise B2B SaaS since the beginning. So for the last 15, 16 years, early investors in Salesforce, SuccessFactors, ServiceMax, Veeva, Box, Yammer, right? So we've done pretty well, partially because we're hyper-focused and that focus and the enterprise SaaS community was kind of a good little marriage for me to join. And my role is interesting in that I help to source deals and do due diligence on deals, but more specifically, once we invest in a company, then I step in and help them figure out how they're gonna scale and grow from a million to 10, to 50 to 100. And what's really interesting is, and the reality is when you're in an organization, you're neck deep in it, you don't realize that you're actually, what you're seeing over and over and over again are a bunch of patterns. And so when you get onto the venture side, we're basically, one of the things I've learned is we're in the business of pattern recognition. And for all of the early startups, whether you're a seed-funded startup and trying to get to an A, or an A trying to get to a B, you're gonna run into the same shit. You guys are gonna face the same problems, regardless if you have a ton of traction and if, you know, the only difference I would say is if it's a seasoned leadership team, if the team has kind of like built a startup before and had a really nice exit, then they're more apt to be aware of some of the gotchas that they're gonna face, but they're still not impervious to some of the little things because we put our blinders on. Right. It's hard for us to kind of see the forest through the trees.

Sure, sure. And then, you know, eventually we'll transition more into like some of the strategy things in regards to sales and stuff like that. But I'd love to kind of, you know, jump, talk a little bit about that. So Emergence, you guys do mostly Series A, B, and so on, mostly growth, a lot of like—

Yeah, mostly, mostly, mostly A and Bs. We'll do some Cs if it makes sense. But, you know, we like to get in early. And we also, part of our thesis is, and I didn't mean to cut you off there, Mike. Part of our thesis is we want to be the most important partner to the most important companies. We fundamentally believe in, we're in the people business. When you're investing early on in companies, the technology certainly is going to speak for itself, but at the end of the day, we're investing in the people because we believe that you as a founder can bring together the right leadership team that has the right level of expertise to go execute on the playbook, and that you're going to be able to hire. And stay focused. And, you know, and then the tech itself is going to kind of speak for itself. It sounds a little flippant, but it's not really, because look, at the end of the day, when you're raising capital, it's a long game, right? It's an 8 to 10-year tranche, if not longer. And so you got to— you better like who you're partnering with.

Yeah, I agree 100%. You know, there's in the market right now, there's a little bit of confusion about kind of What about the stages? You know, because, you know, seed has become almost like a phase and raising seed before they get to Series A. So from your perspective, like at least from a, you know, a very hyper-focused SaaS investor, you know, kind of what are some of the, I guess like some of the metrics or how do you look at the Series A? And also, you know, you talked a little bit about patterns a little bit earlier. Maybe you can, you know, elaborate on that a little bit if possible.

Yeah, sure. So there are a couple of things to consider, at least some things that we consider when it comes to investing in companies. First and foremost, when we get involved, the company usually has about a million, anywhere from a million to $2 million in ARR, right? Anything earlier than that, it's hard to tell if there's real product-market fit. And so it's a lot harder to evaluate whether or not that's gonna be a good fit for us. We are, our firm is small. We only have about $1.5 billion. We just announced our Fund 5. We have about $1.5 billion in investments, but we only do about 6 to 8 investments a year. In that, we're super selective in terms of what we choose. If it's too early, it's harder for us to determine whether or not there really is that— they're ready to accelerate that growth, which is where we feel like That's our sweet spot. We can help you just step on the gas, right? We're not the guys that are gonna go dig into your product and determine whether or not the code is, you know, it's really clean, or if you have any tech debt you're gonna have to worry about in a couple years. So when I said earlier, like, we're in the people business, the first thing that we're thinking about is like, okay, who is the founder, CEO? What is the leadership team? What's their background? It's not terrible if this is their first time. It's just something that we also have to take into consideration. It's like, are they going to be able to go and scale? And oh, by the way, when someone comes to them with an offer for a $250 million exit, are they going to take it? Because we're in the business of building billion-dollar software companies, which is again, a long journey. And so when you think about that long journey, we're thinking about the leadership team and what hurdles are they likely going to face, you know, as they grow. When they get to be $10, $20 million, is this really going to be the team that we think they can take it from $20 to $50 million or $100 million. So that's one of the things we look at. The other thing that we look at too is just, is, you know, this, everybody's gonna say this, is put market size. Like, you know, are you going after a market that's really big enough? And, you know, don't come to us with like, oh, we're going after a $30 trillion market, you know, because it's like everybody in the world, that's not real, right? It's just like everybody wants to put the biggest number possible. But I think one of the things that I've noticed, it's the most realistic discussion is the ones that really carry a ton of weight, right? So yeah, you have a $3 trillion market, but what's really serviceable is maybe, you know, $50 billion. Okay, that's good enough. That's big enough. And then what you can really go after, at least over the next 2 or 3 years, is maybe like $2 or $3 billion. Okay, that's fine. That's good enough. But we also know that there's more. There's a lot of headway in there. So of course we look at market size and then we look at market traction. You know, how are you progressing? You know, we definitely look at churn. Are you just adding customers and they, you know, falling out the bottom of the bucket? The other thing that's really interesting that I think is weighing more heavily on investors nowadays is engagement. So you've got an application, how much are people using it? How much data are you able to capture and what are you able to do with that data that is unique? 'Cause if you, the more and more you think about the application of AI and ML and everyone's talking about it today, that's like the hot buzzword. At the end of the day, that's only valuable if you have a very large and very unique dataset. And so we're always thinking about, well, okay, this product is really interesting now, but what's possible in the future, right? We're not gonna push you to go there, but we wanna know that there's more, there's a bigger pie, right? We'll take a little taste of this piece right here, But is there more for us to chew on, you know, a little later?

Yeah, well, without engagement, right, it's essentially a leaky bucket, right? The product's a leaky bucket and then your cost of customer acquisition is just so high that it's just almost impossible to scale, right? So that's critical to get to, by the time they get to you, to have really strong retention in the product, really good churn, like you said, that makes perfect sense so you can scale.

There's also something else too, which is a bit of a gotcha, which is hard to really validate, but at the end of the day, it's defensibility, right? So, oh, we're first to market. All right, well, great. Guess what is, uh, your question is, when is Microsoft, Google, yeah, um, you know, LinkedIn, Salesforce, when are they going to do it? It's not a matter of if, it's more a matter of when. And, um, are you— is what you're building unique enough? Is it defendable enough for at least a year or two? Because we know eventually your competitors are going to catch up. But is there some element of defensibility in what you're building? It's really, really important to nail that. And it's more than just putting up your competitor slide. It's more than just saying, oh, look at how much more traction we have than everybody else. It's like, no, but what makes you different? What makes you unique? You don't have to explain your secret sauce, but you have to explain how you think you're gonna continue to be able to stay ahead of everybody else.

You know, it's interesting. So, you know, as I mentioned before, this is an interactive discussion. So it's not really when people are already starting to ask questions. So everyone here, please ask questions. We wanna make this as interactive as we can. And before we get into more of the tactical stuff around sales, you know, Alex asked this question is, you know, what indicators do you use to confirm if the company has, you know, has basically kind of figured out kind of what their sales process or their sales cycle looks like? And, you know, how do you look at friction and things like that?

So what's interesting is, you know, when you're, when you're, and again, remember, I've only been doing this for a year and a half. So I'm not like, you know, 20-some-odd-year, you know, venture investor. But, you know, one of the things that I've noticed is when, you know, when people put up their slides, they're like, okay, you know, cool, we're at about $1.2 million in ARR, and, you know, we think we're gonna get to $6 next year. It's like, okay, how exactly is that gonna happen? You know, at the end of the day, no matter what everybody presents, it's kind of like your resume, you got to do some digging into it, do some backchanneling. You have to— so for us, we spend a ton of time talking to customers, right? And so we're not at the Series A, we're not so much concerned if you have your sales process nailed or if your pricing and packaging is nailed, because the reality is you're still testing. We're still in that A/B testing stage. We want to know, do you have customers and are they willing to actually stay on as customers and repeat as customers and renew as customers? And is there a willingness to pay for your product? Right? And, you know, you may be charging too little right now. That's okay. We can increase the price when it makes sense. But more specifically, it's maybe it's a little less about, you know, do you have the machine well-oiled when you get to us at Series A? And then once we get engaged, then it's like, okay, cool. Now let's figure out how to build that foundation so that you can scale.

Makes sense. So speaking of scale, speaking of, you know, stepping on the gas, you have, you know, just looking through your background, you've kind of built a reputation around driving revenue culture, so to speak, in teams, at least in your previous experience. Could you maybe elaborate on what you mean by driving, you know, revenue culture? And then maybe we can go into customer success versus sales and all this.

Yeah, totally. I love that you brought that up, by the way. In fact, I'm writing a book on this right now. The idea is this, like, I think one of the things that I've noticed because I've been very fortunate, you know, both, you could argue Oracle, Google, Salesforce, Box, they've all gone through this crazy hypergrowth. And one of the things that I've noticed is every company that goes through that growth at different tranches, you start to get siloed. And unfortunately it even happens in startups even earlier. Like you've got sales over here and marketing here and customer success over here. The reality is, is the incentive for each group is very different. You know, in today's day and age, in the world of SaaS, we have to earn our customers' business every single month, right? 'Cause otherwise they can turn it off. You know, buying software today and turning off software today is very, very easy. Changing behavior, of course, is rather difficult, getting people to really truly adopt your technology and your solutions. And so it's part of this revenue culture idea is a mind shift. It's recognizing that marketing, sales, and customer success, and product and engineering, are all, should fundamentally be hyper-focused on your customers. And if you think that, you know, my job is actually to help to drive revenue, not to do sales, not to close deals, but to drive revenue, then it forces you to think about the long game. Like, if I want you to be a customer of ours for the next 5 years, what do we need to do? What level of engagement do we need to have? What do we need to deliver? How do we need to support you? What does the product need to actually do for your customers? The moment we start all thinking about not just you as the customer, but your customers and how we can reshape your interaction with them, then we're thinking about the long game. And now we're thinking about long-term revenue, right? We're not thinking about a singular sale and a renewal and an upsell and expansion. We're just thinking about, we're thinking about, you know, how do we make you wildly successful in front of your customers? And that means rethinking how we communicate across the organization, right? So the idea, you know, something like 70% of all engineers have never been out and seen a customer. That's crazy. If you're building a product, how are you not talking to your customers about what exactly they need and why, right? That just doesn't make any sense. So it truly is a cycle. It's not just, it's not just a singular motion that everybody Everybody does. And so in order to actually create a revenue culture, you actually have to change the incentive program for everybody in the company.

Yeah. Can you, you know, maybe give an example, maybe, you know, of where you've seen it in a startup or maybe perhaps within your career of how you kind of shifted this entire conversation, how everybody communicates within the company and so on? Because it's really important for people to kind of start thinking through, especially—

Yeah. So it's interesting. So I think I really noticed this when I was at Box. And in fact, Box has done something different with our customer success managers, which is pretty unique. And not, you know, far too often customer success folks think that like, well, I don't want to be in sales, but I love working with customers, right? But if you look at their behaviors and everything that they do, they pick up the phone, they do outreach, they engage, they try and get their customers to respond. That's all, you know, prospecting, if you will. Then they, you know, they run meetings, They do, you know, maybe QBRs that are customers. They're looking for opportunities to expand, to see if they're really getting the most value out of their product. So essentially they're selling, right? They're just not calling it sales. So what's really interesting is they're— they— but the customer success teams know so much about the customers, way more than the salespeople do, and of course just light years more than what the engineers know. And so what if we take Customer Success and we actually marry them with sales and we give them a joint number, right? And we say, hey, Customer Success, you're actually— part of your responsibility is to identify new opportunities and upsell and expansion within your existing accounts. It's not just about driving adoption, it's not just about ensuring implementation and the integrations are working, it's about really looking for those extended opportunities to make them wildly successful. And if the opportunity doesn't exist in that account, then how about if we feed that information back to engineers and the product team so that we can deliver on what they need in order to continue to grow and expand with us? And then, oh, by the way, because customer success folks aren't really trained to actually sell, then we need to incorporate the sales team to help us kind of carry that over the line, right? So if you think about it, it is a full circle, but part of that starts, and a large part of it starts actually with customer success and helping them to to rethink what their actual job is and what their purpose is in engaging and working with their customers. The other component of that too is infusing what I call the voice of the customer into the entire company, right? And Salesforce does a remarkable job of this. If you go to Dreamforce, Dreamforce is nothing but their customers talking about Salesforce, which gets to be a little disgusting because it's kind of self-serving, but they do an amazing job of not saying, "Hey, listen to us, Salesforce." Well, okay, they're pretty cocky about that, but they don't just say, "Hey, listen to us." They say, "You know what? Don't just take our word for it. Actually listen to what they say." And we listen to what they said, and then we infuse that into our culture and our ethos, into our product, into our whole go-to-market strategy. And part of it even says, you know, so it's like, if I'm reaching out to you, Mike, and I'm calling on you, I'm a salesperson, this isn't me talking. As, you know, I'm an employee at Box. This is me sharing what I've learned from my customers that you might want to know. It's a different perspective.

That's interesting. So, you know, even for earlier-stage companies, perhaps even companies that are just getting ready to go to Series A, building this, the voice of the customer into the foundation of the entire company culture, I guess, it makes Makes a lot of sense. You know, can you share maybe some best practices around, you know, some ways that you've seen this be successful?

Yeah, totally. So, well, first of all, whatever your pitch deck is to go fundraise money, whatever your first call deck is that you use to present to customers, however you position yourself in front of your customers, you're doing it wrong. It's backwards. You need to flip it upside down. Typically, the customer story, if you will, is at the very end, right? Because it's kind of like the validation that what you— what problem you're trying to solve and how you're solving it is right, right? If you think about the typical architecture, I would argue you need to flip it upside down. I would argue that you need to lead with, hey, let's just say you're a seed stage company and you've got 5 beta customers. Well, I'm going to venture to guess you're learning a learned a ton from those 5 customers, right? And those learnings you can easily share with customer, potential customer number 6, don't you think? So why don't you lead with what you've learned from your 5 customers, or what you've learned over the last year, over the last 2 years, and lead with that and help them understand things that they might not be thinking about. You see, if you think about the Challenger Sale, the Challenger Sale is all about how do you challenge your customer to think differently. Well, how you do that is you use what you've learned from your customers and you share that with prospects and you say, hey, you might be facing some of these problems in the future. You might not be facing them now, or you might not even be aware of it, but it's quite possible that you're going to be facing these in the future. So let's talk about what that could look like and let's talk about what it might cost you if you don't think about this now. Same thing with your pitch deck. You're, you know, you're a seed-funded company and you're going to pitch for your Series A. You know, for me, the first thing that I might put up there is like what a customer says. First thing, I want— this isn't us pitching you. This is— I'm actually pitching my customers to you because you giving me money is going to allow me to go serve them, to allow me to serve more of them. That's a really interesting angle. Yeah. No one's ever thought about that. But what typically happens, everyone comes in, they're like, here's the problem that we're solving, here's how big the market is, here's how we're solving it, and here's— look at our revenue run rate. It's like, okay, cool. Great. I get it. But what are you doing for your actual customers?

Right, right. You know, it's interesting, you know, we have Jose here, he asked the question, it's like, how do you, you know, are you essentially implying that businesses should grow by focusing on like efficiency, or how are you thinking about that?

Well, I mean, look, we always look at efficiency, even at Series A, we're looking at, okay, how much money have you raised? How efficient have you been at spending that? And we also recognize that there are some markets where it's a bit of a land grab and you're gonna basically have to buy the market. We kind of get that, but you wanna buy it smartly, right? Are you being smart in terms of how you're actually going out and getting your customers? And then, you know, the other thing we're looking at is, you know, the customers that you have right now, where's the expansion opportunity? Is there any upside or you're just getting a customer and that's that, and that's a customer and then you, you know, your job is basically just kind of support them and nurture them. And go get net new logos and that's how you're gonna grow. So it's not so much like, am I saying, you know, grow efficiently. You always have to be mindful about how efficiently you're growing. 'Cause look, in the early days, everything is a trade-off, everything. Do I hire one more engineer or do I hire an AE? Do I hire two AEs? Do I hire an SDR? Do I hire, when do I hire a VP of sales or a head of marketing? By the way, I would argue you hire a head of marketing way earlier than you think, right? Because your brand is something you've got to build, right? You need to build up that muscle. But it's a trade-off, right? I would also argue hiring customer success managers before you go out and hire a swarm of AEs, because again, those customer success folks are there to help make your customers, your existing customers, insanely successful. And the more successful they are, guess what? The more they can be your advocates, the more they help you sell, the more they help to tell your story.

Uh, you know, it seems like a lot of modern, modern sales now is basically, uh, at least SaaS in particular, is basically land and expand kind of strategy nowadays. Um, you know, how do you look at, uh, you know, you know, how do you look at growth in between, like, you know, landing more customers and then expanding a lot within the account? Because it feels like a lot of the growth could almost be within the account, given how large some of the organizations could be.

Yeah, totally. And again, that's also part of that kind of one-two punch. It's a little bit of a trade-off in the beginning. In the very early days, you're just going after net new logos, right? Because you have to prove your value in order to drive that expansion. And some companies it takes 2 or 3 months to prove the value, and other companies it could take 9 months or a year. It also depends on the kind of companies you're selling into. If you're selling into larger enterprises, their buying cycles are a lot longer. Right? And so your expansion opportunity is going to be a little slower. If I'm selling into a bunch of smaller companies and then we happen to— it also, you know, it also kind of depends on your product roadmap. But again, early-stage companies typically only have one product. Right? And so there's not a ton of expansion opportunity other than adding more potential users, which is something that you can do early on if you— if again, you can prove immediate value. So the thing you have to evaluate is Given your existing customers today, talk to them, reach out to them, find out what it would take to actually expand your footprint in that organization. And if you find that there's actually some low-hanging fruit, then go hire somebody to just focus on expansion. Hire 3 or 4 AEs to go after net new business and then hire one person just to go after expansion. Because you're, again, early days, you're just learning. What you may find is like, oof, expansion's actually taken a lot longer than what we thought. We're crushing on gathering net new logos, so we're gonna just stay with one person over here and hire actually more AEs to go get net new logos. So it's, again, it's a test, but you have to really, really truly understand your customers and the value that you deliver to your customers and, you know, what's their propensity to actually expand.

Yeah, and just piggybacking on that, you know, Evelyn basically asked here in the chat room, essentially, kind of, she's trying to figure out at what point, you know, do you just focus mostly on customer service, getting that account to be really, really really happy versus kind of increasing the team and expanding like the logos, kind of like how do you think about that? Just trying to drill down a little bit, give them some—

Yeah, yeah, look, I mean, I'll give you one example. We have a company that we just funded, we haven't even announced it yet. They've been in stealth mode for 2 years. Hmm. 2 years, total stealth mode. Nobody knew about them. I think they have something like 5 or 10 customers And that's it. They didn't take on any more. They just said, you know what, we're gonna take on, you know, a certain number of customers and then we are gonna be hyper-focused on making them insanely successful. And when they're successful and then we know how to make this repeatable, then we're gonna open up the kimono. We're gonna go public with, you know, the fact that we raised all this money back, you know, 2 years ago, and then we're gonna go hog wild and turn on the marketing machine, right? And so, you know, It's interesting because in the early days you get so caught up in like, oh my gosh, all this interest, all this interest, and people are raising their hands saying, hey, I want to learn more, and you want to just go after and grab all that. But you have to be careful not to be blindsided by your existing customers. So in the early days, you know, whatever, how, whoever your early customers are, your first 20 customers, just you, and especially as the founder CEO, spend an inordinate amount of time with them to just to understand them and their market and their customer and their, and their your customer base and their business and what you're really doing for them. And then, and, you know, and set your sales leader on going to get net new logos, but don't choose one over the other. Does that make sense?

No, that makes sense. Evelyn here says, thanks a lot. She says she loves that advice. That's great. Keep them coming, people. We're here to optimize this time, right? So keep the questions coming. You know, I wanna switch a little bit into another part that, you know, you seem to, at least given like my research on what you've done, you know, around, you know, using data and customer insights and tracking and some best practices on that. So maybe on a high level, like, how do you think about, you know, using, you know, data and customer insights to essentially scale your sales organization?

Yeah. So there's, I mean, when it comes to data, I'd say there's two parts of data that you wanna be looking at. There's your customer data and how they're using the product and, That certainly is something as a founder and CEO and your head of product, you guys are going to be like ridiculously focused on that because you want to understand, well, what are they actually using? What aren't they using? It's interesting, I'll give you an example. When I was at Box, we didn't— it took us way too long to really truly understand how people were using our product. Think about that, how they were using it. One of the things that we understood was, hey, if I was selling to you as this is your use case, was your— you want to use Box for your sales team so you can get access to your proposals and pitch decks and what have you on your phone or your iPad. IPad, right? Just say that that was my use case. What was interesting is I noticed that if you didn't actually download the mobile application within 7 days, your usage of the overall product was like 20% of what it could be. Very, very, very low. And so what we realized is like, oh well, shit, if I'm selling to you and the use case is the sales use case, then I have got to make sure that you, you get your entire team to download the mobile app. Within the first 7 days. That's my number one goal. Otherwise, there's a very high probability that within a year or 2 years you're going to churn because you're just not really using it. Again, kind of goes back to that change of behavior, right? So, so it's really, from a data perspective, it's really, really important to look at how people are using your product and how you can actually further drive engagement. I said it in the beginning, engagement is a hugely important metric nowadays for us to get a sense of, of what the real value of what it is that you're actually selling to your customers. So that's one level, or that's one data set to dig into. The other data set to dig into is internally, right? So it's, okay, how many people are actually responding to any one of our marketing campaigns, or, you know, any one of our tweets, or any one of our LinkedIn posts, or our content marketing? And then what is that conversion ratio? And we look, this is kind of standard, we all know what's the conversion ratio from, you know, some sort of marketing activity to, you know, to a lead, and that lead to an opportunity, that opportunity to a close. But The most important thing is just to be dead honest. Don't inflate your numbers. That doesn't make any sense because at the end of the day, we're going to find out anyway. Once we start digging in, we're going to find out, we're like, "Wait, wait, wait, hold on a second. Wait, your conversion rates?" I was working with one of our companies just recently and I realized, think about this, we were only able to, from a capacity standpoint, because we had so many leads coming in, this is a very rare problem, we're very happy about this. We had so many leads coming in, we didn't have enough AEs to actually call on these leads on a second day. 10% of our leads that we got on one day, we were able to call on day 2. 10%. So just think, if you get 100 leads, that's like 90 leads on day 2 that are just disappearing.

Gone, yeah.

Right? So you gotta ask yourself, what's happening to them? Where are they going? I mean, look, even if you can't call on them because you just don't have the capacity, just do something with them. Put them into a nurture campaign. Put them into a database where you can send them some content just to keep them alive.

Yeah. Feels like a lot of this conversation so far has been, if I was to summarize, a lot of it is focus, right? Like finding the kind of the right focus. Totally. And maybe we can kind of shift a little bit into pipeline and pipeline management. You know, you've got, in many cases, right, even for seed stage, even a Series A sometimes, like, you never have enough resources to kind of get things done. You got the founder going out there, you know, calling, cold calling people and things like that. And so, you know, speaking of focus, you know, how do you think about like managing your pipeline of prospects? And, you know, just can you, you know, give us some insights on that?

Yeah. And what I'll do is I'll also give you a couple examples. And by the way, I'm gonna move for a second I'm about to run out of battery power. I happen to be at my house right now, so I'm gonna carry you guys all on a tour through my house in San Francisco, so I'm gonna get a little dark here for a second. So let's think about pipeline. So one of the things you have to understand when it comes to managing pipe and thinking about pipe is, I'm gonna go back to capacity. We were just talking about this before, right? So you've got, you know, you're a seed stage company, you're a Series A stage company, you've got 2 AEs and maybe 1 SDR. If you're lucky. Maybe you've got 3 AEs and a couple SDRs. The question that you have to ask yourself is, well, technically, in a given day, how many companies can I actually call? Number 1. And now, if I actually get somebody on the phone, how long is my average conversation? Is it 5 minutes? Is it 15 minutes? So therefore, how many actual conversations can I have within a given day? Of those conversations, how many of those am I likely to convert to an opportunity? Okay, cool. So now I've got a percentage. So let's say I'm able to have— let's say I'm able to make 30 calls in a day. By the way, anytime you think you can make any more than 30 calls if you're doing demos as well, you're smoking crack. Like, it's just— you realize, because like, let's say, Mike, I'm calling you and I don't get you on the first try, or you're like, wow, I'm just jumping into a meeting, call me back in an hour. I'm like, oh, okay, cool. Now I've got a task to call you back in an hour. Well, now that's 2 calls just to one person. Just to have a conversation, right? And so then I have to think about, well, okay, so all those conversations, and let's say 10% of those I can convert into an opportunity. So that's 3 opportunities I can convert in a given day. Great. But now I have to manage those opportunities. Now I have to think about, well, how long does it take from the moment I convert that opportunity? How long does it take for me to get through every stage of the sales cycle? Now, if it's a $1,500, you know, average sale price, well, then I could likely close that in one call. Quite possible, right? So it's like, okay, cool. So if I can close that in one call and if I can create 3 opportunities in a day, but then, which is great, but then how long, how much time do I have to spend on those 3 opportunities to get them closed, right? So your sales cycles, so, you know, this is why I go back to this equation called the sales equation, which is so important for everyone to figure out today, right now. which is this, which is the number of opportunities times your average deal size, size times your win rate divided by your sales cycle. And that will help you to determine what your output's gonna be. Right? So if I need, so just think about it this way. If my average deal size is $1,500 and my win rate is 10% and my sales cycle is 20 days, how many opportunities do I need in order to, hit a $100,000 number? I don't know the answer, by the way, but if you just do— I'm just saying, if you do the math, let's see, $1,500, and my win rate's 10%. So, in order to get to $100,000 at a $1,500 deal size, then what do I need? I need 40 deals? No, I need more than that. That's only $60,000. So, I need 60 deals. Okay. So, let's say I need 60 deals and they take 20 days. And I need to do $100,000 a month. That's crazy. Well, let's just say that I need to do $100,000 in a quarter. Um, so I need 60 deals, and if they take— and they take 20 days on average, then guess what? By the second— the end of the second month, those 60 deals have got to all be in play, right? So think about that, because I don't want to find myself, you know, with 10 days left and know that I still need 2 or 3 deals because if the deals take 20 days to close, then I'm done. I'm screwed, right? So, 20 days out, so day 10 of month 3 in that quarter, you've got to have all 60 of those deals in play and ready to close. Now, of course, up until that date, you will likely have closed quite a few of them, but it's like, it's just doing the reverse math and knowing, well then, if I need 60 deals, how many opportunities do I actually need? Well, guess what? If my win rate's only My win rate's only 10%, then I need 600 opportu— I need 600 opportunities. Well, how the hell am I gonna get to 600 opportunities? Well then, okay, let's think about what my conversion ratio is from the number of contacts or number of calls that I make to an opportunity. You see how you can like just back into this?

Totally. You know, just for everyone here, can you please repeat the equation one more time? I got this in the chat room.

Yes, no problem. So it's the number of opportunities times your average deal size times your win rate divided by your sales cycle.

Great, Mark, if you could put that in the chat room, that'd be great. You know, and you can literally kind of drive, you know, speaking of driving revenue culture, right? Like you can almost use this to drive the entire company based on—

Absolutely.

And align everybody together on it.

Right, so here's the thing. If I need 600 opportunities, now let's continue the math, but let's continue it outside of sales. If I need 600 opportunities, well, how the hell am I gonna get those? How many calls can I make in a day? I can make 30 calls, and I'm lucky if of those 30 calls I can turn those into 3 opportunities. Okay, but that's making 30 cold calls. But think about the other opportunities that I've got to manage throughout the cycle. So then the question is, should I be doing all the cold calling or should we go hire some SDRs to help me, you know, to help create opportunities for me so then I could just manage the opportunities and close them? Right? So the question is often like, when do I hire an SDR? Well, you hire an SDR when you're, you know, when you know you're at capacity in terms of what your AEs can actually do. Your AEs in the very beginning are going to be booked, your SDR, the AE, and maybe even in some cases your CSMs, Right? Right. So you're gonna hit that capacity threshold really quickly. And so you're gonna have to determine, well, if we've got a bunch of inbound interest, then I could probably hire an SDR pretty quickly and let my AEs just focus on closing deals.

Yeah, that's a really interesting point. You know, like you said, in the early days, basically the founder is the AE that does everything, right? And then maybe expands out eventually when everything breaks, right? And then, so I think that's also That's a very important point. Like basically what you're saying is when things start to break and you can't support it anymore, that's when you wanna start thinking about adding some more resources because just the time ratio, you know what I mean?

Totally. Or you can also say, well, okay, I need 600 ops in order to get to $100K in a quarter because my deal size is only $1,500. So I've got two options. One question is, where do I need to hire someone on the marketing side to help me go out and generate enough awareness and interest so that I can get those 600 opportunities? The likelihood of that answer is yes. Hire someone in marketing a lot earlier than you think, because you're gonna need it way sooner than you actually think. And by the way, hiring a VP of marketing will take you 6 to 9 months, period.

Yeah.

Hiring a VP of marketing. So think about that marketing hire first or early. So that's one thing. The other thing you have to consider is, well, wait a minute, what could I do to actually increase my deal size? What if I took my deal size from $1,500 to $3,000? Meaning, are we pricing this too low, or are we just taking down deals too quickly when there's an opportunity to actually take it from $1,500 to $5,000 or $6,000, right? Or are we going after the wrong accounts? We're just going after all the little small mom-and-pops who are raising their hand, and I'm doing these little piddly deals where I should be going after bigger deals. Which, by the way, if I do go after bigger deals and say they're $8,000 now, my sales cycle will likely get longer, so I have to be more thoughtful about that. So again, going back to my pipeline, going back to the number of opportunities, maybe I don't need as many opportunities, but I have got to have them all in play by the middle of second month in the quarter, right? Versus the middle of the third month.

Yeah, that's fascinating when you start to kind of dive back, just work backwards, right? Just work back from the target and kind of start building that.

Let me add one more thing to that. Yeah. We talked about marketing, right? So when do you hire that marketing person? What are they actually doing? Let's talk about customer success. If I have to have, you know, what did I say? If I have to have 600 opportunities to get me to 60 deals, which will get me to my $100K number, cool. Can, do we have enough people in customer success support to support 60 brand new customers right now in the quarter? Well, holy shit. Let's think about customer success. How many customers can they handle in terms of onboarding? And what is your onboarding process like? Maybe you realize, Well, shit, we should probably automate that because it's way too manual right now and we don't have enough customer success folks. And so let's think about automating our onboarding process and have customer success focus on, you know, just adoption, right? And so that's the other thing that you have to think about in the equation. When you take a look at this equation and you put those numbers in place, number one, I want you to use it to set your benchmarks, but then also use it to think about, well, how does this impact marketing and how does this impact customer success? Because it is all connected.

You know, just to piggyback on that, you know, I'd love to kind of get your thoughts, you know, about, you know, compensation and essentially kind of like aligning all of these different, you know, on a high level, just at least aligning, right? Like customer success versus sales versus marketing. And sometimes there's a little bit of both, you know, like how, you know, how have you at least, you know, how have you thought about it in your career?

Well, um, At the risk of like, you know, kind of poking the bear, I would say, let's, on the marketing side, I think marketing's comp structure is a little skewed. 'Cause if you think about what their incentive is, it's like, get butts in seats to a webinar, you know, build top of the funnel MQLs, which by the way, no one ever really agrees what an MQL is. No one ever does. I don't care how well-oiled your machine is. Marketing's always gonna say, well, like, I'm giving you way more leads and you can handle sales and be like, yeah, they're all crap. There's no interest, right? So that's always gonna be a tap dance. But I think one of the interesting things is if you give marketing a revenue quota, and I'm not talking about the VP of marketing, I'm talking about the head of product marketing, a revenue quota, the head of demand gen, a revenue quota. And what I mean by that is every quarter, you know, part of your job is to help to influence revenue. In a company. And so, you know, part of your comp plan isn't just like, you know, your base, your bonus based on hitting your objectives that are to the masses, but it's also like, hey, if the sales team actually hits its number, then you're gonna get paid out on some of that. You're gonna get bonus on some of that. It shifts their focus. It shifts, it's like, well, okay, how can I make more money? Well, number one, I can do more webinars and do more campaigns and create great content. But number two, I can also go help the sales team. As much as I possibly can. And maybe that's creating some assets for them, sales decks. And yes, I know that's normally a part of a marketer's job, especially in product marketing, but how often are they actually comped on it? What if you actually gave them commission on all deals over $100K? That's interesting. I don't know. It's just, I think we need to reorient some of their comp structure. I think the flip side on customer success, the way I see it is you give them a quota every quarter, and your part of your job is to identify upsell and expansion or net new opportunities in your, you know, pool of your book of business, your pool of existing accounts, and you've got a quarterly revenue target that you need to help to uncover. And oh, by the way, we're going to pay you on that, and we're also going to pay the AE. So for example, if, Mike, if you, if you uncover a huge upsell at one of our accounts because you realize that, okay, they could use one of our other products, maybe they can use our platform to build a new application. You take it all the way through, then I get involved because I know the account, we help close it together, we're both getting paid on it. We're getting paid a little differently because I'm on a different commission structure, but this goes right to your quarterly number, your quarterly target.

That also seems like it would really incentivize collaboration, right? And it seems like there's sometimes there's not as much as there should be. Right? Because the sales guy or the salesperson got the account and then the person, there's another person whose job is to expand the account and it's just—

Yeah. Well, and that's actually a really interesting question. And I'm not saying that there's a silver bullet to this because every company and every industry is different. But the idea, and I get this question a lot, which is, okay, at what point do I have AEs that are just hunters that are just going after net new logos? And then at what point do I build an expansion team? And my thinking is, Again, if there's an opportunity to call again, it depends on the solution and the market that you're going after. But my thinking is, if there's a huge— if you can do ELAs in a company, then the AE should own it forever. Forever. Because just think about how long it may take to just get that seed deal, that $50K deal, and, you know, a Procter Gamble or a GE, right? Well, guess what? The moment I land that deal, that means I understand the landscape, I've worked with procurement, I got us in, you know, I got the MSA done, We're in as a recommended vendor, right? So like, I've done all the work, I've done all the heavy lifting, I want to continue to carry the torch, right? Now, my CSM though could help to identify areas that I could go call in and dig into and sell to. And so collectively, we're going to do it together versus I just landed the deal, I keep it for 6 months, and I hand it off to an expansion team, which To me, it's like, so it's a little demoralizing. I mean, I get both sides. So it totally depends on your company, your product, and the industry that you're selling into. And what, like, if you're only selling a product just for, you know, HR, if it's just a recruiting product, well then, you know, it's a little difficult to do an ELA across an entire organization. So therefore it may make more sense for me to be like, okay, I got the account, let me hand it off. And if there's expansion, you can, you can take it because it's not going to be huge.

Makes sense. You know, and with your experience, I mean, it looks like a lot of this kind of still relies on tracking, right? Whether it's tracking metrics for everyone involved and everybody here, you know, do you have some best practices you can give the founders here on tools and using tools to align the organization around some of the stuff, you know, or anything like that?

Yeah. So look, early-stage founders, if you're in the seed stage or even Series A, hire yourself a Salesforce admin or a sales ops person right away. Do it, do it right away. 'Cause here's the deal, you need data, you need access to the information that you're getting dumped in Salesforce. If your product is integrated into Salesforce, if that's what you're using to manage your customers, you're going to need to start to run these reports of like, how is your product being used? When was the last time they got touched? When was, you know, how, who's involved in it, who's in the nurture campaign. So first and foremost, if Salesforce is your CRM, your system of record, go hire somebody to help you manage that because it's very daunting and get really complicated. As the founder, maybe in the very beginning you're like, okay, so I got this because I'm a, you know, I'm an engineer at heart. I can dig into the product. I know how to build apps. That's fine. But that's not gonna be your, that's not your job. Your job is to build a company. right? And so if you have to outsource it, outsource it, but hire somebody to help you dig into your data and build all the right reports, because, you know, we— everybody says this, well, garbage in is garbage out, you're never going to get good data out. Well, guess what? The only time you have to get it right is at the very beginning. So set up your Salesforce instance right, get the reports created right, and do yourself a huge favor in the long run once you start to get— once you have that data. Now, One thing you're also gonna learn is Salesforce reporting is pretty two-dimensional, meaning if you're looking at like that sales equation that I told you, you can't build that specifically in Salesforce 'cause there's too many dimensions. And so you may end up having to export it out into, you know, products like Grow or Domo, which by the way just went public today. I don't understand that when they spent $800 million and don't make any money, but that's a whole nother story. But you got like Grow, Domo, Tableau, you know, Qlik Tech. There's a number of different tools out there that you can use to dump some of your data in to actually get some, some three dimensions, if you will. And I'm sure there's other tools out there that I didn't mention that people are like, wait, use this.

Well, I saw that in one of your earlier talks you mentioned also just get a tool that your salespeople want to use.

Oh, totally true, right? So, and I mean, that's a really, you know, look, we all know that your CRM is gonna be your system of record, but at the end of the day, you also have to have a system of engagement, right? And, you know, it's funny 'cause I often get the question of like, well, what is, you know, when should I buy? I'm gonna use two of our companies as an example first, just because, you know, I'm a little biased. But so Chorus is an amazing, you know, conversation intelligence platform, right? Allows you to record your calls and then get insights in real time as to what's happening on the call. Hugely valuable if you're gonna hire a bunch of AEs and you need to scale them and onboard them, right? Because I could record this call that I'm having with you, and then guess what? Everyone can listen to it. They can understand what went well, what didn't go well. So there's that. And then you've got Salesloft, which is your customer engagement platform, right? It allows me to determine my cadence of calls and emails and tweets and LinkedIn messages that will determine, you know, that will help me stay on top of managing all this interest that happens to be in play. Question is, which one do you buy first, right? Yeah, which one do you buy first? I mean, on the one hand, if— so part of that, part of that is, well, it depends on your business. For one of our companies that has— it's getting just a ton of leads in, they actually need to go out and buy Salesloft first because they need to manage all these cadences. As I told you before, like, you know, only 10% of those first— those day one customers are actually getting a second call. So it's like for them, it makes more sense to buy Salesloft first and then Quorus. But for other companies, because they're hiring like crazy, then it may make more sense to buy Quorus first and then Salesloft. So part of it is, is just thinking about the nature of your business and what problem you need to solve for first internally. The other, the company that was getting all these leads, the other reason why we actually recommended Salesloft first, by the way, they own both now, Salesloft and Quorus. But the reason why we said Salesloft first is because we also needed better data as to what we were doing with all these leads. Salesforce is difficult, and especially if you don't have Salesforce administrators, it's difficult to really understand what's happening with all this inbound interest that's happening, that's coming in, right? You make one call and then they disappear. You're like, well, where'd they go, right? So the beautiful thing with at least Salesloft analytics is, and there's their integration to Salesforce, is you can start to see, well, what are we actually doing with everybody that's raising their hand saying, hey, I want to learn more?

Yeah, that, that's fascinating. Um, everyone here, uh, you know, we're getting to the top of the hour, so if you have questions, this is a good time to ask them. Uh, you know, I kind of want to bring it back to kind of where we started. It seems like you earned, uh, the, the, the title Chief Storyteller at Bock. Uh, you know, how did you— how did that come about? And what would that— you know, what does that mean, right? It's— and it looks very relevant to founders, right? As founders, we're always trying to, you know, get people to buy into our stories to—

Yes, well, I don't actually know if people are all like storytelling stories, because I see people come in and they pitch and I'm like, oh, shoot me in the head right now, please. Look, the idea of Chief Storyteller is actually a title that I created myself. The reason for it was kind of twofold. When I was there at the time, we didn't have a CMO. And so there's still questions about like, hey, how are we actually talking about who we are and our view of the world to our customers in a way that is not Aaron Levie? So the problem what you have, especially at Box in particular, is you've got Aaron Levie who's speaking at the 40,000-foot view and he could just open his mouth and people will listen to him. He doesn't need to earn any credibility because he's earned it, right? Sure. So the problem with most of us is we have to earn the credibility, especially if you're on the sales side. If you're a founder CEO, you have a little bit by default because that's your title. But the idea of Chief Storyteller is like, how do we take this voice of our customer that we were talking about before and how people are really using the product and the values that they're really getting out of the product, and how do we infuse that and feed that back into marketing and into sales and into our decks and into our messaging, the stories that we tell? So there's two parts to it. One part, which is how do we become a great storyteller? And that is an art. You do it at home, you do it with your friends when you go out for drinks, and when you, you know, you're having dinner, you tell stories. It's what we do all day, every day. And then we get to work, and what do we do? We speak in bullets and fragments and, and, you know, text language, right? We don't actually tell stories. And, you know, and that's— so one of it is, the one— on the one hand, it's like teaching people how to become a great storyteller, and then on the other hand, it's how do we actually take stories from our customers and fuse those into all of our assets in a way that is less self-serving and much more sharing.

You know, final question on that here, you know, any best practices or any things that have worked for you while you were doing this, any kind of like tips or tricks for everyone here on how to kind of improve your storytelling abilities?

Go take an improv class.

Huh.

I don't care how shy you are, how uncomfortable you are at presenting, Most founders and CEOs are like, they just hate getting on stage. Some, you know, some are actually quite dynamic, but most people, I mean, look, public speaking is the most fearful thing next to dying, right? Like more people are afraid of public speaking than they are actually of dying. In fact, it's the most fearful thing that anybody, that of all human beings, which is crazy. So if you really want to get better at it, go take an improv class. It forces you to be dynamic and spontaneous and in immensely present. You have to be present in order to be on stage because you have to understand what's really going on. And far too often when people are presenting, they're just like, it's like a machine, you're like a machine, you're going slide by slide. And by the way, most slides are god-awful, but it's like, you know, you're not actually having a real conversation. And one of the things you learn in the world of acting is your job is your job regardless of who the audience is, regardless of how shitty your character is, or how dark or evil or whoever it is, your job is to elicit a positive response from your audience. That is your job. And so how do you do that? Well, you recognize the fact that I'm communicating with you, whether that's here in this webinar form, whether that's on a Zoom, whether that's, you know, whether that's on stage or whether that's in a small, small group. That is your job. And so in order to actually do that, you also have to build empathy. And build a level of understanding of who you're trying to communicate with.

That's awesome. Doug, look, I honestly, I could just drill down on everything we talked about for hours and hours. I'd love to.

So could I.

That was amazing. I mean, that was amazing, everyone. Thank you so much, look, for taking the time out of your busy schedule to do this with us. And, you know, well, you know, look, Jill even mentioned here, hey, if anyone wants some sources for improv classes in the Bay Area, I can direct you. So boom, there you go.

There you go. That's awesome.

Awesome. Thank you so much for taking the time to do this. That was great, Doug.

You're welcome. Good luck, everybody. All right. And then, by the way, I'm just Doug at MCAS if anybody has any questions.

All right, Doug at MCAS. All right, guys, thank you so much. Bye.

Bye, guys.