Navigating the Rocky Road from Founder-Led Sales to The First Dozen Sales Professionals | Demodesk

I'm Veronica, co founder and CEO of Demodesk. Demodesk. To everyone who doesn't know what we are doing, just so you have Context is a sales meeting platform that mainly does three things. So we assist reps in the call with Playbooks Battle cards in order to increase close rates. We automate workflows related to the meeting, so scheduling, preparation, documentation, and also help sales teams get insights into what's actually happening in calls to close the loop. I started Demodesk four years ago and I've been working together with Lauren for the past one and a half years.

Yeah.

And great to be here. Thanks for joining us. I'm Lauren Wright. As Veronica said, I've been at demo desk about 18 months and joined Demo Desk, really, because I had spent actually the past nine years before Demo Desk at Glassdoor, starting there at the early infancy of our monetization and in the US and then moved to Europe a few years in to launch the European business and went through all sorts of rocky parts of that journey. And when I met Veronica and the concept of ws, I was like, wow, this was the tool I've been looking for all of those years. So just help scale up the business and build repeatable process. So I'm really happy to talk about that rocky road and, and share a little bit of that story today.

Yeah. So for every startup, especially in the SaaS world, there are typically three stages of growth. So the first one obviously product market fit from 0 to 1 million ARR. So 1 million ARR is the kind of typical benchmark for figuring out whether you have product market fit or not. I mean, there are also a couple of other signs, but this is like the, like number one thing in B2B SaaS, especially then the second stage, predictable. Building a predictable sales process, hiring a sales team typically until 10 million ARR. And then beyond that, more focused, of course, on building a scalable, repeatable sales Org, going into multiple countries, launching multiple products, launching basically new things beyond the things that you just did in the beginning. So we are at the moment at this baby blue stage in the middle. And we basically passed product market fit stage early last year and are now growing towards 10 million ARR. And I'll be mostly speaking about the green stage for product market fit, whereas Lauren will be focusing on the baby boo. The second phase, predictable. So the first question, when you are a startup that is just getting off the ground is how do you actually get your first 10 customers? Especially for us, we B2B2B SaaS, we need to get our first 10 companies that use our product and pay for it. And how we actually did that, how almost everyone else also did it, is really reaching out to our personal network in the beginning. So friends and family trying to basically leverage anyone we knew who also had a tech company, had a SaaS company, knew someone who had a SaaS company being really, really annoying, asking for any introduction that we could find. And by doing that, we were actually able to get to the first 10 users. So I'm saying users, because back then they were not really paying. So it was in 2018, we were first launching the product and really trying to get this in the hands of companies, in the hands of users, trying to make them use it and not stop using it, which as a first step, also quite of a success for us. Right? So that's a major step, people using your product and not stopping to use it. And then by the end of 2018, we also said the product is now ripe enough. We also need to make money with it. So in order to build a business, of course you need to charge money for the use of your product. So what we did is going to the users that we had and said, hey, we need to charge you money for it. You can continue using it, but you need to pay. And luckily most of them said, yeah, it's fine, we pay. And then we had 10 plus customers, which for us was the really first big milestone. When we had that end of 2018, we applied for Y Combinator. So Y Combinator is a startup accelerator in the US located in Mountain View, and you have to go to Mountain View, or at least back then that was the case. Now it was all remote, but we had to move there in a house, living together 24 hours for three months. And that was actually quite a challenge because starting a business with another co founder, just the two of us with a couple of students, doesn't mean that you need to acquire customers only in the first place. But you also want to make sure they don't go away. You want to make sure they are happy. You need to support them. Basically, it was just us who needed to do all of this. So when we moved to San Francisco, it was quite challenging because we had to stay awake during the night basically because all our customer base was in Europe. So how it looked like was I was going to bed, leaving my phone on. And then every second night or so, it really happened that a customer called, has a question, has an issue, needed us to fix anything in the product because of course it was breaking all the time. And then I was really trying as hard as possible to not let the other party realize that I was asleep a second before. And if there was a real issue with going out of my room, knocking on my co founder's door, he also woke up, took his laptop onto his bed and fixed the problem, went to sleep. So that's actually really how the first phase looked like for us. And once we were beyond 10 customers, the next thing that we needed to understand, and also that, of course, every startup needs to understand, right, is how to acquire users and customers that you don't know yet, that did not hear about you before. You don't have a connection to them, they've never heard about you or your brand. Which also is a new challenge. So going from 10 to 550 customers was, for us, the goal at that point in time. And we focused on that for the first half of 2019. And we did a lot of scrappy things. We really tried to do a lot of things that don't scale just to get to this 50 customer benchmark. So just also, to name a few examples, we were scraping LinkedIn. So I don't know if I should tell that, but I just do it. So we basically set up a fake profile on LinkedIn. It was a fake SDR, female SDR who was running on a bot. And that bot reached out to all our potential customers. So we built a bot that scrapes LinkedIn for potentially interesting profiles that fit our ICP Persona that we're looking for, and then ran a bot with that person just called Elena and reached out to these people automatically and then just scheduled meetings. And that brought us to the first 25 customers. We also hacked Product Hunt. So Product Hunt is a platform where you can launch a new product and the number one goal really is to get number one product of the day. And that means you need to get a lot of upvotes. And in order to get there, you need to have, of course, a lot of people clicking that upward button. So what we also did is we reached out to all potential Product Hunt launches. So companies who had a successful Product Hunt launch, asked them what they did well, did the same, and also again, build a bot that reaches out to all of our network on LinkedIn and Facebook, asked them to sign up on Product Hunt two weeks before the launch, and then when we launched, also asked them again to upload. So basically the point I wanted to make here is really do things that don't scale. Just do whatever it takes to get you to the number of customers that you need to have in order to be sure that now it makes sense to hire a sales team and hire your one or two first sales reps, which also, again, was the next challenge. So in 2019, we were looking for someone to join our sales team. And I was also just recently talking to one of my portfolio companies, was also now hiring the first sales rep. And he was telling me, yeah, I think we should hire someone from Amazon or someone from Outreach, someone from a big sales org and someone who really has a lot of experience in selling. And I said, well, I don't think so. I think you need someone who is really able to find their own leads, is really able to hustle, is hungry, can live in an environment where there's nothing there yet, where there's no established process, who is really a builder who wants to build things, who wants to prove things. And that's also what we did. So we found someone for our next one and then really focused on results. We accepted that process was super, super inefficient back then. So definitely a lot of the tasks that we did back then we shouldn't do anymore today. But whatever it was that brought us to the results basically was right for us back then. This chart, I did not make this framework, but I love it. So my sales advisor gave it to me. And it's also like a common use framework. It basically explains that during these three phases of growth, which is product market fit, go to market fit, and then growth and mold, which is like the later stage that really all of these phases have the different challenges and the different things that are important in these different phases. So especially in the first one, right. It's really important to make sure that the customers that you acquired, they are happy, they love using your product, they don't stop using your product, and they're successful with it. Everything else belongs to the second phase. Only the second phase, it really makes sense also to think about unit economics, think about sales quotas, think about basically customer acquisition, cost, and anything else that helps you really build something that's repeatable and scalable.

Great.

So your founder has at this point built a nice stable of customers. And if you're ahead of sales, you come in as a VP of sales, whatever your daughter, you really need to assess what that customer base looks like. Because as Veronica said, she did whatever it took. She was block and tackling and got a large subset of customers, which is amazing. And actually outside of her friends and family. So complete strangers validated the fact that Demodesk solves A large problem, so check that. Great. But as you look into that customer base, you might find an interesting set of animals. Maybe there's some deviation between the problem that you set out to solve and actually what you're solving for the customers. And maybe they're telling you to do more integrations and customize this and customize that. So you really have to step back and say, okay, where can I pattern match within my customer base and find out where we have a really, really good product market fit and then lean into that. So the first thing we did was segment our customer base and create a sort of leading indicator of success. Who were the customers that were going to renew with us and were growing with us. And we created a customer health score around a number of different parameters. And then as we were looking to acquire new customers, we even took it a step deeper and we, we created a proprietary system called prit, which basically stood for what is their revenue motion, what integrations do they have? And how is that going to tell us who our next customers should be? The reality is, you go and pitch to VCs and you tell them, this is a huge blue ocean. We have so much TAM. This is a 90, $100 billion problem. But the reality is you need to really come in and say, okay, who are the customers that I can help today? And it definitely is different from that big vision. And it's easy to get very, very distracted, especially if you have inbound leads coming out. You have those hungry reps that you hired initially. Who you are looking at, oh, this is a nice shiny logo. I'd like to bring it in. And you, you start to get really disorganized very, very quickly. So we used that proprietary scoring to actually identify the customers that were our sort of perfect customers. And then we went and kind of brick by brick, created account lists that were lookalike accounts to those customers. So that really helped us narrow in who are the next 100, 200 customers that we need to be going after today. And so start to really create a very strong and stable customer base. So that customer base is built around the central problem that you're solving and then understanding what it takes to get them in the door. Like map out the customer journey step by step. What does it take for that customer to actually buy your product? And you may need to define your ICP again, it may be different than what you thought it initially was. And by the way, if you're further along in the journey than the rocky road from founder to sales ed, and you actually have recreated scalable process. You're on the road to repeatable process. This problem kind of comes out again as you're trying to go maybe international. I certainly had this happen when I was launching a team in Europe and had a repeatable process that the US but suddenly our ICP was slightly different and I had to redefine that as we went along. So there are certain, I would say, aha moments along the journey. And Veronica already identified one of them was when she said, all right, I think it's time to hire that first sales rep. I actually have customers that have bought from me that are not my friends and family, which is a great thing. And I say aha moments. But make sure that this isn't like an emotional gut feel thing. It needs to be validated by real quantitative, ideally moments that happen and you have to create sort of scalable gates for yourself so that you don't get ahead of yourself. So really trying to discipline yourself of like, do we really have product market fit? Do we really have a predictable revenue process? And actually, David Kellogg was here yesterday morning and went through sort of a mini masterclass on how to figure out repeatable process. If you didn't see it, I recommend you watch that recording. So I won't go into tons of detail, but on this slide, but what is super important is that as you start to hire that first sales rep or that second sales rep, that they get to productivity or they're on their way to productivity, and then you layer in the next reps. You don't just hit the gas and then hire five more reps because it's very, very difficult, just because one thing happened to get the next thing to happen as well. And then once you have that first squad of people really seeing that they can actually hit quota together. So I think the magic number is 80% of the team get to 80% to quota or higher, which is hard to do. There are many, many teams that are fully scaled and not hitting 50% quota. So it's very hard to do that magic number. And if you hit that magic number, then potentially it's time to hit the gas. The other thing to look at is thinking about, okay, you may have predictable process, you may have figured out what it takes either by leads or by going outbound to get a customer through the funnel. And you can rinse and repeat that, but it may be predictably inefficient and that's what you don't want. So you may be running a business where your unit revenue economics just don't make sense. And then you need to really figure out, okay, what are the levers to growth that'll get me there. And maybe you have a expensive CAC initially, but you have to figure out a plan to reel that in and not just say I'm going to reel it in, but actually map out a plan and progressively reel that in and then layer in your reps over time along the way. You also ideally have it all figured out in that you are supporting those reps you initially have, your things have changed or your Raskin matrix messaging very clear for your initial customers. You also have the right pricing and tools, initial tool, tool stack to support your customers. When you get into repeatable process, you have the playbooks to actually support reps. So you can't just bring in reps and have them drink from the fire hose. They have to be able to. In fact, I learned that the hard way. I had hired a rep initially, just one rep to bring in and someone who is very experienced and I figured, yep, he'd figure it out. Well, he didn't. And he, he was very lost. And luckily he, he had the sort of characteristics that Veronica described and was able to kind of manage through that situation. But you really want to, you know, hire reps, give them the sense of autonomy that they need to, to figure things out. But also the guardrails and that comes with having playbooks. You also need to have solid unit economics figured out. But the reality is there's pressure to scale quickly. There's a plan that you probably subscribe to to scale quickly and you end up hiring too many people too fast without a real plan to productivity. You also may see some aha moments along the way and decide that it's time to scale up when there's probably something, some piece of the puzzle missing, whether it's on the acquisition side or. I've heard stories, I luckily didn't go through this, but heard stories of acquisition side being very, very strong. But things were going out of the out the other end very, very quickly. So make sure that your net revenue retention is there as well. No playbooks, lack of adherence. One in four reps fail, that's the average. So your burn rate can get high either very, very quickly or slowly just increase over time and absolutely nothing. None of this works even if you have the perfect playbooks and you have the perfect tool stack. None of this works if you can't figure out hiring. In fact, if you screw up a lot of other things, which you inevitably will do, we all do if you don't hire the right people who are utility players and missionaries, the people who yes, care about compensation and care about the things that salespeople care about. But if you don't hire the right people who are really in it to build something with you, who are doers, then you're going to have people leaving the organization because they don't have it in their heart, they don't care. So you have to really figure out hiring and that is the piece of the puzzle, how to survive. There are plenty of headwinds when it comes to hiring. You don't have an employer brand. The market hopefully is getting better, but it's been very difficult and maybe amazing talent on paper. Like Veronica's example, having a glossy logo is not necessarily the right person for your organization at the right when you're at the early stage. So really finding that entrepreneurial person, and usually that comes through networks and being able to tap into people who will subscribe to the culture that you're building. So I'll pass it over to Veronica. I mean, for me, I think hiring underpins all of this, but I'll pass it over to you of your key takeaways since you've been on the journey from the start.

Yeah, Just to summarize what we've basically been telling you for the past 21 minutes. So we're going to time is like four key takeaways in order to really build a sales organization from scratch. So I mean we started from nothing. Also in my case, I'm a first time founder. So in the beginning for me was particularly hard. And number one is really there's no other way than just hustling. In the beginning. You need to hustle, you need to figure things out yourself. You can't rely on someone else to solve things for you to figure out who to acquire, how to acquire customers, and also how to retain them. So it's something that you as a founder, founding team need to figure out. And also then the first team members that you hire also need to be hustlers as well. Other than that, it's super, super tough to really build a business from scratch and the talent who might be a right fit for the first stage, so for the very early stage of your business definitely might not be the same fit for a later stage. So we also had a lot of cases where we hired people in the very early days who were amazing fit, but once we grew to a certain revenue threshold, they were just not a fit for us anymore. So either they moved into different positions or we just parted ways because just didn't fit for the stage where we are. And that's also sometimes not easy and also sometimes painful to learn for founders, especially because you always see your startup as like a family. But at some point in time it needs to grow into a business. And yeah, nailing your ICP and buyer journey is definitely number three. So we did some mistakes as well in the early days. So we tried to just acquire every customer that wanted to pay for our product and didn't necessarily find out enough about them to really understand is our product a fit for them. We just said, hey, you want a product, you want to pay for it? Great, please take it.

Awesome.

We have a new customer and in the early days that's fine, but later you just pay for it because they churn and it messes up with your numbers. So late is by the point where you need to focus on unit economics, you really need to stop doing it. And we definitely also had a few cases where this happened. And yeah, number four is definitely unit economics. Before, you really haven't had two reps who are hitting quota consistently like up to 80% before. You haven't really gotten to a point where you know what the quota actually needs to be. Like how high does the quota needs to be? It doesn't really make sense to scale excessively because it just makes the problem bigger. It just helps you. It doesn't help you really figure out what are your unit economics that you need to optimize for. It just creates a lot of clutter and focuses you away from the actual things that you should need to out at this stage. I don't know if I had forgotten anything if you want to add anything here.

Yeah, I mean the other thing around hiring is potentially that you also have to create conditions for people to be successful. So create conditions for them to develop and grow within your organization. So, so you can hire all the right people, but they will leave if you have not given them autonomy to grow and develop. And that's why they joined your organization. And it's really, really hard because everything matters. Every day matters, especially at the beginning, every second matters. So it's easy to want to try to really micromanage people or but create systems for them to live within, but give them autonomy to grow. And I think that culture, they will help grow the culture, they will help build the company. They are the people on the front lines that are going to tell you when things aren't working when they are instead of those more seasoned players that maybe work at an established company who really just want to kind of plug in, get the playbook and go. The people that you hire are so important on the sales Reps and your SDRs to tell you what's happening in the market. They are talking to the largest volume of customers and you really have to be able to listen to them and also empower them to be their best. So I think, yes, hire the right people, but you are also, you know, very much responsible for creating conditions for them to excel and grow. And if you do that right, it'll be an amazing, amazing journey that will, you know, change lives and be memorable for everybody. So it's, it's a very important piece of the puzzle.

I just hired my first VP of sales. I'm a founder, so we had founder based sales up till now. So this is the perfect lecture. So my question is, what is the biggest shift or the biggest change that Lorem brought to the company?

The biggest change you ever came across in the company?

No, what is the biggest shift that you brought now when you came into the role of vp, if you can point out what one thing that really changed compared to when Veronica was doing it, what changed the most? What's your biggest impact?

It's hard to understand. I know, I think there's a background noise, so it's hard to understand. But I think it's what's the biggest shift or what's the biggest change that impact that we've seen in this journey so far? Yeah, I mean for me, I've only, I've been at the company 18 months and I say only because it feels like, of course, you know, startup ears are like dinosaur ear dog ears. Sorry, they, you know, feels like a lot longer than that. I mean, I'd say that the biggest shift, notwithstanding market conditions obviously completely shifting, which is we're all going through. But I think for me personally, in my own career, I went from a company where I was there for nine years and I had gone through various stages of growth. And so for me it was a shift to back from going. I had already had repeatable process and I was kind of a startup within a startup in Europe. And then I went to join demo desk and just really building again from the start, which is like my DNA. So I love it. I'm a problem solver. I like to roll up my sleeves and get my hands dirty. But for me that was, I would say, the biggest change and I really had to shift my, my mindset back to the building phase and not the scale up phase. And really I think the ICP and defining your ICP is very, very, very difficult, especially if you're a category leader. If you're trying to create this new category, plant it in the ground. Yes, there's a lot of overlap in sales tech, but we don't have any very, very direct competitors that are at least leading the market. And so that is hard to do because you really have to lean into that mind shift of like, things have changed, this is the way forward, and really convince people in sort of a challenger way to do that. And that makes finding your ICP harder when you don't have established competitors in the market.

Sam.