Sales Management Podcast
Cory Bray, 8x author and co-founder of CoachCRM, digs into hot sales management topics.
Sales Management Podcast
94. Startup sales hiring with Sam Cartwright (Debate Episode!)
Which roles should early-stage companies hire and in what order? Lots of opinions out there, with Cory and Sam having theirs. They debate the topic in this engaging and informational episode.
Welcome to the Sales Management Podcast, your source for actionable sales management strategies and tactics. I'm your host. Coach CRM co-founder, corey Gray. No long intros, no long ads. Let's go Another. Well, I don't know if it's going to be a debate. Might be a debate, could be a debate was positioned that way, but let's see what it turns into. I've got Sam Cart right here. We're going to talk about what order should salespeople be hired into startups? You've got lots of different roles out there. How do we stack them up, bring them in and then what are the? It depends is because it always depends, sam. How are you?
Speaker 2:I'm doing great. How are you doing, Corey?
Speaker 1:I'm doing great, All right. So person, couple people, group of people start a company. They build something, they create something and then they got to sell it and at some point they say, well, we need help. What order do we build out our sales team in? It seems like you have an opinion on this. I might have a different opinion, maybe a different scenario, so what are your thoughts?
Speaker 2:Yeah, yeah.
Speaker 2:So I think at that pivotal moment where you have a founder and they're starting to say, hey, we have enough stuff going on here, we have enough traction, we have some good signals maybe not quite product market fit, but enough to say, hey, we're on the right track, we're solving some pain in some way that people are in tune to buying a little bit in some capacity I just think that when you're starting to think about who you should hire first whether it's a founding AE, a founding SDR or a founding head of sales the right way to go is to start with a founding AE.
Speaker 2:The majority of the time, of course, there's going to be those outliers I'm sure we'll talk more about those but I would say that the main reason why I think that is the majority of the time, that's the role of that first go-to-market hire is that person needs to be a full-stack AE. So they're going to be building pipeline, closing, probably their own SC and then also doing, potentially, some customer success or customer support. So I think that the AE is the most malleable of those three roles and usually, from a cost perspective and just a you can find the right fit perspective, it's easier to hire a number of different reasons why that's probably the way that you should go first if you're choosing between the three of those.
Speaker 1:Using the word easy and also saying prospecting, sales and customer success seems like a pretty big leap to me. To be honest with you, that's my first reaction. I want to dig in a couple of other areas, but to get a person that can effectively own all three of those because they're the only one doing it, who we? That's a lot.
Speaker 2:Certainly hear you there. I think that if the founder has been doing founder led sales to this point, they've been having to do all of that themselves and I think that finding that AE is finding the right partner to be able to do that. And I think that there is going to be times where if you are a founder and you say, hey, I'm pretty good on these types of parts of the sales process, like I'm pretty good at customer success, I'm pretty good at demoing and being my own SE, but like the pipeline side of things I'm pretty weak at you know, then then the great thing about a founding AE is you can get more of that experience of the SE, of the other stuff, from that founder and learn from that founder. So, and kind of vice versa hey, I'm pretty weak in a lot of these areas like go hire more of a tenor to E that has a lot of that experience, a lot of that background.
Speaker 1:So I think that the place to start this conversation is probably around how much success and how much traction has the company had to date? So I'll let you propose the scenario of they've got no traction and they want to figure out how to sell. They've got a bunch of customers, but they're all small, or maybe they've got a couple of larger customers. Where do you want?
Speaker 2:to start. I the probably the timing of needing a second person is you probably have design partners. Maybe you don't have like a ton of outbound customers, but you do have a couple of design partners that are maybe on some cost-effective, like grandfathered in deal, and you're looking for someone to then operationalize, so build some of the stuff and also start to to build on some of the wins from the design partners. That's probably a place I would start.
Speaker 1:Got it. So you're talking as early as design partners, and so in my mind, when I think design partners, I'm thinking you've got three to 10 customers that are paying you something. You're working together, beating up the product. Is that aligned with your thinking? You've got three to 10 customers that are paying you something. You're working together, beating up the product. Is that aligned with your thinking? Exactly Okay, and those people are still in that design partner phase.
Speaker 2:Totally. I mean, hey, when I first became a founding AE, we were pre-launched, we were two months to launch and some of our demos were still Figma mock-ups and I think that still Figma mock-ups and I think that someone that's a very realistic scenario to have someone to try and bring someone in.
Speaker 1:Yeah, so when you think about it and we just use ballpark numbers or ranges here when you think about a founding AE, how much money does this person cost?
Speaker 2:And let me, let me put this up in two different ways.
Speaker 1:So what's the, what's the comp structure look like? And then on the, on the flip side, what does this person require? If I don't make X this year, then I'm out.
Speaker 2:I like the way that you put that at the end there. So a couple of things to think about there. So one is if you're an AE and you're looking for some stability and you're looking for like, hey, I'm guaranteeing myself X amount of dollars, like I don't even think that the founding AE role would be something that you would find really attractive. The upside the founding go-to-market hire is something that has significant upside. So maybe the upfront cost to the actual business might be somewhere in the range of like 80 to 120K of a base salary.
Speaker 2:I hear some companies talking about OTE, which doesn't totally make sense to me because you have, say, 10 design partners or you don't have repeatability yet. So I don't know how you could effectively create a quota. So I think more having a structure around like a percentage of the actual deals closed, makes a ton more sense at that stage. So I think what you're looking at is hey, we'll have a base salary, we'll have a percentage of whatever sales that person brings in, and then you'll also have that equity on top of it, which I think is also a significant consideration at that early stage. So for a founding AE it's maybe 80 to 220K for base, maybe it's 15 to 25% of commission rate, and then maybe it's somewhere in the 0.5 to 1.5% equity.
Speaker 1:And it's hard to find a really good salesperson for $80,000 base salary and somebody that wants to prospect and sell and do customer success and you've got a product that you've got. You know, we talk about this three to 10 design partners that are customers kind of, but they're probably the founder's friends or through network or something. And so you're taking this person and you're saying, look, we want you to create escape velocity for us. We want you to take us from basically having some folks that are beating up the product for us to Million dollars in revenue or whatever, whatever it is. Yeah, I just I don't see that working.
Speaker 1:Where I probably coached 150 to 175 founders on this through work at 212 Angels and independent consulting agreements and all my friends that start companies, and I coached authors on books and they are often doing that with their kind of companies at this stage. So I think the thing is I've seen a lot of things where people have tried a lot of different ways and bringing in someone at an $80,000 price point or even $120,000 price point and trying to go from. My buddies are using the product, go find strangers to pay us a bunch of money for it, the person. It's funny you often find this world where the first salesperson is actually the third or fourth first salesperson and they've just turned through a bunch of them before and I just don't think that that's the move and I think there's one way where it is the move but I'll let you respond to that first.
Speaker 2:Yeah, so I completely hear you. I don't think finding a head of sales for that same problem or founding SDR is going to be any easier.
Speaker 1:I think a head of sales at that stage is idiotic.
Speaker 2:Yeah.
Speaker 1:Yeah, so we agree on that.
Speaker 2:But I even think with a founding SDR I I think it's it's hard to find the right balance of hey, they have enough experience to where they might that I think there'll be effective at this job, which it's completely green space. We have no ICP. Most SDRs are given a playbook to begin with and then there's a ton of time consuming parts of it, of having to actually train this new person and also you're taking a bet that they'll hopefully become a closer in the future and they've never done that before. So you either would have to cut bait with them if they can't close or just do. It's a huge time suck to just invest to try and get that person to become a closer to begin with.
Speaker 1:I'm tempted to do something I've never done on this show before. This is I think this is like the 104th episode. I'm going to say a cuss word. How about that? Everybody you ready? Oh, let's do it All right.
Speaker 1:So my favorite saying about founders is that your job is to build shit and sell shit and everything else is bullshit. So let's, let's just start with that. So thanks everybody for humoring me. I'm probably not going to do it, but that was. That was fun. So if I'm building and I'm selling, I'm a founder.
Speaker 1:Okay, let's, let's assume for a second that we've got co-founders, because it's kind of silly to start a company by yourself. You can do it whatever, but the people I know that start companies by themselves, they have a co-founder. It's called their therapist. So in a world where somebody is building and selling, you've got other people that are working with you. So assumption is they're building. So you've got one or two other people that are working on product.
Speaker 1:If the founder's world right now is that everybody on the founding team has to just be totally focused on product, I don't think hiring a salesperson is the right move at all, because you've got to hammer on product, right. So are we on that? Totally, yeah, absolutely so. Then if that's not the case and one of the founders can work on sales, the question then becomes what do they do? And sales is pretty easy. You got to find people to talk to, you got to disqualify them or sell them something, and then you got to make sure you can deliver. So the customer setup and customer success piece is important, and then you got to make sure you can deliver. So the customer setup and customer success piece is important, and founders keep an eye on that because, man, that's the best place to get product feedback. There is no better place to get product feedback than watching someone use your product and say, golly, gee, why did they do that? So when I look at the world of a company going from two to five to 10 customers and then trying to get to 20, 30 to 40, the person that started the business, the person that understands the market, the person that risked their life and their reputation, and they're either working off of their savings or they put their name out on the line to go earn capital from other folks to invest in this business I don't think that delegating those incremental 10 or 20 or 30 customers to a $80,000 to $120,000 person is a good move, and so what my take would be is this is the person, this founder, ideally the CEO, because they're probably the more businessy person maybe not because they're the person probably the more businessy person, maybe not. And really good, yeah, so that's really good.
Speaker 1:Ctos typically don't hire a business person as their sidekick. It goes the other way. It's a really good CTO starts a company. They go find another technical person to start the company. So get this person that's the founder of the business and get their calendar full. And yeah, they probably don't have the world's best discovery skills. Teach them how to do discovery, teach them how to do presentations and proposals and all that type of stuff. So that's, but that's learnable. And these are the types of people that work 80 to 90 hours a week and so it's, it's done in short order. Get their calendar full, get that customer base jam into 30 to 40, hire a customer success manager and then at that point you've got enough feedback loop, deals, pipeline that. Then I'm totally down to bring in a couple salespeople. But hired one salesperson to go from design partner to we're going live now. Man, I just don't see it.
Speaker 2:Yeah, yeah, I, I think and you know, I think you're right. I think that I think that the timing is going to be really tricky for any, any startup, and I think you need to have a pull from the market of hey. I as a founder. I think you should get to that place. Where that founder is is filling their calendar. I think that that you can learn those things of learning how to fill your calendar with enough pipeline to get you going and then you know if, if you want to hire the customer success and the founder wants to be still the just the only person owning sales for a while, and you can get away with waiting to make that first hire, I don't.
Speaker 2:I don't see any issue with that. I think with still, when the time comes of hey, I think I were onto something here. I have some process in place. I need to build, I need to bring on someone else. I still think that the way to go is going to be that that founding AE and and maybe it's like hey, I've had some success and I want to build I want to bring on someone that's maybe a little bit more junior, that I can teach and that I can mold or it's. I want to build someone, or I want to bring on someone more tenured that. I want that person to grow into my head of sales, whatever that might be.
Speaker 1:Well, that second one is the one I always recommend, because I think what you don't want is somebody with three years of experience that thinks they're the anointed VP of sales Totally. You don't have time for that. That's not taking someone from I, you don't have time for that. That's not taking someone from. I was an SDR three years ago and four years ago I was the treasurer of my frat. Making that person a VP of sales that can go stand in front of a board after you raise your series B, then it that's a tough job and big companies can help groom and develop that person with some of the life skills they need to get there.
Speaker 1:I just I think that the thing to focus on from my standpoint is how full is the founder's calendar and what's it full of? And there's, there's three, four things that can be full of. It could be there'd be prospecting blocks, it could be sales meetings, it could be customer meetings and it can be product build, because you build it, you sell it and everything else is bull. So of those things, well, let's take product build off. I was, I actually had a coaching call with the founder yesterday. I was like he's like man, you know his prospecting thing's not going as great as I want. I was like why he goes. I can't find time. I said are you writing code when the sun's up? And he said yes.
Speaker 2:I just looked at him and goes yeah, no, I shouldn't be do it when the sun's not up, when you're when your customers are, are asleep, exactly, exactly.
Speaker 1:And then he's like, yeah, my wife goes to sleep at nine o'clock. I was like, cool code from nine to twelve. He's like, yeah, that's so that? Okay, so let's, let's take the build off the table for a second. So then if the founder's calendar is full of sales meetings cool Irony got it. I'm down with that. If it's full of customer meetings, I would hire a customer success person and we're offloaded to one of the other founders that's doing engineering, cause you still need proximity there. And then have the founder is good at sales, do sales, and if the calendar is empty, then either hire an SDR or two or hire a firm or something that can get the person's calendar full. And that's the move, because it is so much easier to get somebody or a firm to do prospecting work than it is for somebody to get somebody to come in and predictably close deals for a product that's half-baked.
Speaker 2:Absolutely.
Speaker 2:And hey, I think founders should wait as long as they can before they bring on that person.
Speaker 2:I think that the founder, as you said, if you are continuing to have success as the salesperson at your business, you should ride that wave as long as you can.
Speaker 2:And I think, if, and I think ideally, ideally, ideally, where and I'll throw a little curve ball in here Um, you get to that point, yeah, you get to that point where I think it the most effective thing would be to hire potentially multiple salespeople. So hiring maybe multiple AEs, and I think a reason for that is you then have multiple people that can step up and can actually potentially grow into that head of sales. Like, if I'm going to go through three AEs anyway, why don't I get two of them and see which one will actually stick and actually grow with me and actually be in the boat with me as a founder? So I actually even think that bringing in multiple people and if you can get to that point where you bring on both of them, you can have healthy competition, you can get them to grow together, work off each other's strengths, learn together, experiment together. I think there's a lot of pros to doing it that way too well, yeah, if you have the money, it's the sure.
Speaker 1:I think it's settled that that's the right thing to do if you have the cash to do it, because you can horse race them, because if you have one person you can't get information. So if one person doesn't close anything, well, are they doing good or bad? I don't know.
Speaker 2:Yeah. But you could say I mean, hey, if the founder is, I still think even if you bring on your first AE, I think the founder is going to still be partnering with that salesperson the majority of the time. Is that anything yeah?
Speaker 1:That's the other problem. That's the other problem. So, if I'm good, so let's just say I'm a good salesperson. I don't want to be somebody's sidekick. I don't want somebody sitting over my shoulders in a discovery meeting cutting me off, talking about product roadmap and all of this stuff. That happens all the time, and so this is where it gets really tough, right. So we talked about the compensation bands, the things we started with those lower end. Well, what happens when you, when you start with the upper end? Well, upper end, people come from one of two environments. They either come from startup environments or chaos that's the good thing to do or they come from these corporate worlds where they've got all types of resources and everything. Those people are going to wash out 100% of the time, 90% of the time and I know one founder has hired three of them already. I was like stop hiring those people.
Speaker 2:Totally. We agree there Absolutely.
Speaker 1:So then you get this person who is effectively using the founder as a sales engineer, and it's fine later on, but initially the problem is that the discovery question that the founder wants to ask is in their brain and it's not in the brain of this person that's more junior or whatever. And so then you end up in this world where who's actually running the meetings? And is this AE at this premature startup just a sidekick? And you don't want to hire a sidekick. That's the overarching point that I'm trying to make. If you're trying to hire a sidekick, cool, do it. Hire an analyst, hire chief staff, hire an SDR, but a salesperson that owns a quota should not be your sidekick.
Speaker 2:A hundred percent. I think that you know. I think when you do, if you're a founder and you do bring on that AE, you, I think that you know. I think when you do, if you're a founder and you bring on that AE, you have to think of them as your partner and you actually have to think, like at the time that you're bringing on this AE. You've probably had hopefully you've had thousands of conversations so far with your ICP or who you think your ICP is, or at least hundreds of those conversations.
Speaker 2:What's great is you now have a blank canvas of someone that hasn't been talking to your customer that much and you almost can play a little dumb. I, you know, I I take from my own side of things where when I first started doing discovery when I was a founding AE, it was I, it was almost like I was asking the quote, unquote, obvious questions but those were still the right questions to be asking Um, because of pure ignorance, where my founder at the time was like, well, obviously they're doing this. And you're like well, do we know that for sure? Like, let's get more validate, I don't know that yet. And so you also get to have them form their own opinion of what discovery questions you should be asking and you know, over time. Yeah, maybe the roles are going to be the founder is that SE? And you know they have to be ready for that. I mean, part of a founder's job is just giving, doing a job and then giving the reins off to someone else. That's, that's the founder's job. Until so, get used to it.
Speaker 1:Yeah. So then the question is what? What comes next? Is it, is it building or selling? And there's financing obviously involved in this to some extent. So that's the tricky part. So let me ask you this question what are your thoughts of people in foreign countries that make one 10th of what Americans make, taking the American sales jobs?
Speaker 2:It is a. It's a, it's just. I, you know I don't have too much of an opinion on that yet, mostly because I haven't interacted with it too too much. Um, but you know, just just from from the gut, it's like, uh, you're just going to have to, I guess, make that bet yourself of, of like the cost effectiveness and how you know. I I kind of hate to say this too is like what your perception would look like too, of like you could maybe look like you're cutting corners from a founding even if you have that, even if they're, even if they're great at one 10th of the cost, I think that there's, you know, something that it maybe says about your branding.
Speaker 2:I'm not entirely sure, even if they're great at one-tenth of the cost, I think that there's something that it maybe says about your branding. I'm not entirely sure, but I think that there's maybe more of an intrinsic value, even if the cost is maybe significantly cheaper. If you're maybe putting it overseas, I love this analogy of there, like a haircut place where, uh, there's one place that completely undercut the other and they had the five, five dollar haircuts versus like the 30 haircuts, wherever it might be. And, uh, people started going to the five dollar haircuts and then the 30 haircut put a sign in front that says we fix $5 haircuts and so, yes, there maybe is that cost, but I think in the end, in the long run, I think it'll burn you. You know I haven't personally. Again, as I said, don't have a ton of experience with it, but that's my gut reaction.
Speaker 1:I'm really interested in this topic. I'm so interested in this topic so I'm going to go to the Philippines I'll have gone there by the time this episode comes out and I want to go live the experience and see what's going on over there. Because here's the thing right, if I went into somebody's office and said you cannot hire first generation Filipino immigrants into sales roles in your company, what do you think they would say to me In America? So, like Americans, people with green cards or citizens probably not a good conversation to be having. Yeah, yeah, okay, but but what about hiring this person three years ago, when they still lived in Manila? Oh, that's bad. So this is where it gets really interesting, right? Or, or on the flip side, like, do I want to hire someone that has pink hair and a nose ring versus someone that's wearing a business suit and speaks the same language? I don't know what's the perception. People have perceptions, and so it's a really interesting and fascinating slippery slope, and there is some really cool AI technology that washes your accent away in real time. And so, because, when you think about overseas, I know this isn't your jam, so let's talk about this for a second and then move on. But the thing I think about is okay. So why wouldn't someone hire overseas?
Speaker 1:Okay, iq there are IQ differences by countries, and it has to do with nutrition, it has to do with education, sure, whatever, but they're not massively different. And if you take the average salesperson, you take the average IQ. You're within one standard deviation. So it's not. It's not an IQ thing, is it a hard work thing? Well, I would say that Americans probably don't work nearly as hard as people in many places do. Uh, based on my experience, I was talking to a guy in Buenos Aires and he was like yeah, these Germans came down and said you should move to Germany. I was like why? So I can work 35 hours a week. What would I do with the rest of my time? This guy actually told me it's hilarious. So it's not the work ethic time zone. Well, for enough money, people work in times. And you've been living in New York for a while. There's this trash men are out there at two o'clock in the morning picking up trash and they get paid.
Speaker 2:Well, absolutely, and and I think that you and I both, if there was the right conversation.
Speaker 1:It's the middle of the night, like all right, yeah, like, yeah, yeah, I mean I'll, I'll do stuff in the middle of the night if somebody in your operation wants to work with us. And then finally, it's the accent thing, and the accent thing's got ai technology that washes it away immediately. So the the what it, what it boils down to, is the perception of what's happened in history with offshore experiences from from americans. So I, my belief, is that if you can get somebody that has a strong verbal communication aptitude, then it doesn't matter who you are, where you're from, what you look like, any of these types of things and when compared to very I mean you're using this example 80 to 120 000.
Speaker 1:So as a founder, do I want to go go the? And I'll just use Philippines as an example. So if you Google sales salaries for the Philippines, junior person makes about 6,000 US a year. Senior person makes about 9,500 US a year. So for the numbers that we're throwing out here, we can get 10 to 15 person sales team for one US worker. So sure, we got management, we got to lay around some tech and all these things, but to me that is just a fascinating thought experiment that I'm going to go physically investigate in more detail.
Speaker 2:And I talked earlier about hiring two salespeople. Maybe the experiment is you hire one on stateside and one overseas, and maybe that's like the the. It's almost the experiment of hey, let's put these two in the ring together and and let's see if, if this person is 10x as valuable, um, as someone overseas I guarantee you they're not.
Speaker 1:That's the funny part. I don't know. I don't know who's more valuable or not, but 10x is such a like that is such a high bar. And look, and I'm seeing what's going on with a lot of these people in these sales teams. This is work from home. I've never left my bedroom, type people that just haven't got there yet.
Speaker 2:Man, 10x is gonna be a tough hill to climb oh yeah, hey, I like I worked in enablement for two years and, um, it's tricky to get someone up and running. It's tricky Like you could have someone that came from a product that was selling itself. You know, there's the spoiled salespeople, absolutely, they're all over.
Speaker 1:Yeah, yeah, exactly. So that's the tough culture right now. And then the question I always ask is why would an A player ever want to work for you? You can't hire A players, especially at startups. You certainly can't hire A players at startups. Hard to hire B players. Because if we think about what an A player actually is, well, an A player probably already got promoted past where you wanted. They already retired, they already started a business, they bought a business, they're doing something else, they're out of the game, or hey, everyone they've ever worked with before knows they're an A player. So why are they applying to your job on LinkedIn? That ain't happening. Oh yeah, everyone else that knows they're an A player that have worked with them for the last 5, 10, 15, 20 years. They decided not to work with them anymore. So now this person's randomly wandering through the forest trying to find somebody to work with. They're not actually in a player.
Speaker 2:Yeah, yeah, there's, there's something up and yeah, I hear you there.
Speaker 1:Yeah, and then that logic gets into B plus territory real quickly. And so then you start working down that funnel of okay, so you're going to attract this person to come work for you. For I just keep going back to this number, whatever, it doesn't matter what it is $80,000 to $120,000 with a potential. You're not going to make a ton more than that anytime soon, because the product might not be fully baked. And then you get some equity on top of it, which is great, Like I value equity but a lot of people don't.
Speaker 2:What's up with Gen Z, people not valuing equity? Yeah, I feel like there's been an interesting shift of just like cash flow is king as opposed to equity, which I think that there's pros and cons of equity, obviously, and I think that that's maybe that the equity has been maybe oversold, I think, is maybe the issue, and I think we're having a little bit of a pendulum swing back to the other of, like where I just want cash in my pocket and they don't really care. But yeah, I mean, equity is still the lottery ticket that you that can still change your life.
Speaker 1:Right yeah, and especially if you're early on. So if you're pre-seed, seed stage company, it's worth a ton. Now, if you go join a Series C company that raised a ton of money, then maybe it's worth something.
Speaker 2:But maybe you get a reset if they're not doing well, if they're profitable and cranky, it's going to be worth a ton but you know, I I like to think about hey, if you're joining a series c, series d, it's like maybe you're getting a car, a new car, money, but that's not gonna be like life-changing money, and maybe it's a new car versus a used car, but um, maybe so, but there's exceptions, there's so I got absolutely I got a buddy who, uh, joined nvidia in 2010.
Speaker 1:Joined who nvidia?
Speaker 1:yeah, so he's crushing yeah yeah, it's like 17 years after they were started and then, uh, their stock's up. I don't know how much percent since then, but you know, look at the chart. So so, and you know people joined google in 2006. You know it was crushing, so it's got to be the right thing. But if it's just, I, I think one of the challenges is that the venture capital world is under so much stress right now because their business model is not going to work very well. Going forward. Here's because if you look at these companies out there don't need to name names, but we all know there's lots of these. I raised 200 to $500 million to build this thing that somebody could build with one 20th of that today.
Speaker 2:Totally yeah. I mean, the overvaluation of a few years ago is still. You know, there's still the ripple effects to that today.
Speaker 1:Yeah, and it's going to happen again. The weird thing is that it's a double whammy, because you've got overvaluation and then now you've got incredible workforce efficiency. I mean, I know one guy who's got eight people on his team and they're just slaying one of those multi-billion dollar unicorns and head-to-head deals, because the multi-billion unicorn is a patchwork of things that's been put together over the last 12 years. And this dude just said if I was building this ground up today, what would I do in the last nine months? Build an awesome product and the people keep talking Sam, while we keep talking about somebody who's going to be a billion dollar company with one employee and I think that could happen.
Speaker 1:You're going to have to have a sales team, probably, or just some amazing consumer app. I don't really know much about consumer apps.
Speaker 2:We're going to talk about that, but yeah same the world's shifting fast yeah, and I mean, hey, you, you kind of called it out even just a little bit there you mentioned the, the 100 to 500 million dollar valuation, or that the raises that were that multiple um. But I almost think that where it's where the bloodbath is also happening is those series b, series c companies that were given 40 to 100 million dollars and they're having to live up to the, the pretty much that unicorn valuation, that they're either nowhere close to now, um, they have to settle for some some downsize, some some shitty acquisition am.
Speaker 2:I allowed to curse.
Speaker 1:Yeah, whatever.
Speaker 2:So I think that it's not just that the top of the market, it's at that middle of the market. I think it's almost going to feel the most pain.
Speaker 1:Those guys are getting smoked there. There's a lot of acquisitions going on with them because in 2021, if you were raising a series C, you could do a series C on like $10 million in revenue, which is crazy, which is yeah. So then, but not even just Series C Like a Series C on $10 million in revenue is you know, that's happened over time Not at $40 to $50 million on a $200 million pre-money valuation, like that's.
Speaker 2:Oh my God, I feel like that whole year by LinkedIn was just announcements of hey, we raised like $80 million and that was just all it, all it ever was.
Speaker 1:Yeah, and now my LinkedIn is just full of dudes that worked at Gong in 2022, bragging about how much money they made that year Cause they were selling Gong to people that raised all that money. Yeah, let's. Let's see what's next yeah, yeah, absolutely I think that's hilarious. I was so successful here. Everyone gave me lots of money and all I had to do was yeah, but 2021 too. 2021 was a banner year for us, but I'm not gonna go out and brag about how much money I'm in 2021 it's not even just the bragging.
Speaker 2:I'm sorry, but there's also the, the, the LinkedIn header that's like X something, and then you're like.
Speaker 1:Yeah, well speaking of NVIDIA, Jensen, the CEO, has two jobs he worked at Denny's and he worked at NVIDIA.
Speaker 2:Oh my God, it's such a great LinkedIn and it's like, yeah, yeah.
Speaker 1:No, it's awesome. Like the dude started the company at Denny's. Like the dude loves Denny's, I love Denny's too. Denny's is great.
Speaker 2:They use a little too much oil, but other than that, a plus. Yeah, I can't remember the last time I was at Denny's, but yeah, sure I'll give you that.
Speaker 1:Well, I live in Texas mostly, so that's where I end up. I opt Denny's Waffle House. We don't have as many Waffle Houses here, but when I'm in the deep South, man Waffle House is where it's at. Yeah yeah, so yeah, no. I think the the saying I always go back to is if you don't know where you're going, you're going to end up someplace else. And if the founder doesn't understand what needs to happen and when, then they're going to end up someplace else. And so if what needs to happen and when, is that we need 15 more customers, then they should just get the 15 customers and spend on marketing. Be real careful hiring marketing agencies. Man, I've blown so much money on marketing agencies in my life. I got such a bad attitude. But if anybody knows an amazing marketing agency, hit me up. I'd love to talk to them. And, man, those things, you spend so much money on these marketing agencies.
Speaker 2:they sound so good and then then they don't work.
Speaker 1:But that's fine yeah, which I think also hurts that then the, uh, the other operators in the, the consulting world too yeah, yeah, well, I mean, people spend a lot of money on consultants too, because, because every fired fired VP of sales thinks they're a sales consultant, which is fun. So, um, that, yeah, fun times, fun times. So you get to your next milestone. Then you hire some people. Yeah, the hired crew. I'm excited to see if, if 10 people from the Philippines can outperform one person from New Kansas.
Speaker 2:Yeah, and you know, I think that, um, you know I love what you said of just like hey, what's what's the goal of? Like, what's the next thing and I think that that's one thing that I think a lot of founders potentially struggle with, too is just like hey. That I think a lot of founders potentially struggle with, too, is just like hey, what is that next milestone that we're really chasing? And you know, if it's 15 customers, I, you know, I don't think it's hey, we need to get 15 customers. It's like no, we need to find like 15 customers that love us, like that we're perfect for, and anything else than that is just noise Like, because if we find those people and like get them happy and get them successful, maybe you bring on that customer success person that you're talking about earlier, get them really successful, invest a lot in them.
Speaker 2:That's, you know, I think, the level of specificity that these folks need to operate with. And then, once you maybe have those folks that do love you, that's when you bring on the founding, you know, some other sales, sales type, to say, hey, we've been operating this way, this has been our focus. How do we start to start to scale it? Um, in some capacity and even if it's a small scale, let's get our next 15. Yeah, like. I think that truncating like that is is one of the best ways to do it.
Speaker 1:Exactly, exactly, no, it's great. And then the other thing about the customer success person is make them QA. So product QA for new releases, qa for existing product, qa for customer onboarding, all of that type of stuff. That's just an incredible microscope that you can put on the product and customer experience. I love that.
Speaker 2:Yeah, yeah, absolutely. And I think if you and I, you over-invest in your first 20 customer, first 50, like it, just how do you make them sing your praises and love you?
Speaker 1:Like, hey, this is the best thing and I want to talk about it Totally. Well, and one thing I love for SaaS so this is the last topic that we wrap up for SaaS. So this is the last topic that we wrap up. This whole per user per month, paid annually thing is a model that's built to fit the venture capitalist business model. It doesn't make sense in reality, and here's why.
Speaker 1:If you're forcing people to buy a certain number of seats, then one of three things happens. Either they keep that same number of people over the course of the year Cool, they have less people and so they're paying for stuff they don't need. Or they have more people and you keep having to ask them for more money. So when you look at usage-based pricing which is I just got onto this because I read Frank Slootman's book and he was just all about usage-based pricing and so you look at that you pay for what you use. So if you're paying for something like Snowflake, cool Slack, if somebody doesn't use Slack for a month, slack sends me my money back, actually redeposits money in my account.
Speaker 1:If one of my employees leaves or something and they didn't use Slack for the entire month, my bill gets cut because it's a really good product and it's sticky and exists. Now if you've got products that aren't sticky, that people don't use, that you're concerned about, and you just go oh you got to pay me. Per user per month annual contract, whatever it locks in recurring revenue, it's not really recurring revenue because if they hate you, they're going to churn and that's not recurring. If someone pays monthly and they love you, that is recurring. So that's one of the things that is really top of mind for me is this silly per user per month, paid annually business model.
Speaker 2:I kind of love this topic. I think pricing is one of the trickiest things to figure out when you're, when you're starting off of like how the hell do we package this? Like, how much should we charge people? How is it? You know, you know, one problem that we had is we had somewhat of a seat licensing, but then you have maybe other variables as well, um, that were more usage based.
Speaker 2:But, you know, I love the usage model and we would always have to combat the like, hey, well, uh, I'm going to just be using it for, like, this admin work, like, why do I have to pay for a full cost? Or, hey, this person's going to use it in some small capacity and then. So, then, the value is so different per person. And you're like, hey, have you ever used this product before? And you're like, yeah, but only like a little bit, but it was really expensive. Like their perception is going to be that it's an expensive product because their seat is expensive, um, and they're not using it that much, versus like, oh, I use it all the time and I love it, or I don't use it that much and it's cheap, whatever it might be. So I love this topic.
Speaker 1:Because if people talk about ROI, I think ROI is just the silliest thing in the world and here's why it's silly. So anybody that thinks ROI is not silly, here's the thing I want you to do Go talk to whoever bought. Find something someone in your company bought six to nine months ago and go ask them how they're monitoring.
Speaker 2:Roi just do that do that, and then you're going to come over the best thing is to take a product that they just love and, like you know, even slack. Slack is a good example. Like hey, what's the roi on slack? You're like what I don't know. Like okay, well, if you started the next company, would you buy slack? You're like what I don't know. Like okay, well, if you started the next company, would you buy slack? You're like yeah, but do it in a second what's the roi?
Speaker 1:what's the roi? Stupid, and you know what's derived from. It's derived from a misinterpretation. Peter drucker is credited with saying you can't manage what you don't measure. That's not actually what he meant. He came out later in life and said that's not what he meant, but that's what people started attributing to him, and so they started saying that and repeating it like a bunch of corporate drones.
Speaker 1:W Edwards Deming, on the other hand, was Peter Drucker's kind of I don't know. It was like a Batman and Joker type thing Not really because they were both positive dudes, I guess. Well, deming was saying things like don't use quotas, don't use mandates, replace all that stuff with leadership. And if you have strong leadership, things are going to work and things are going to be great. And he's the guy that went over and got Toyota spun around and so they started whooping General Motors in the 80s and 90s. And then, all of a sudden, we all know how that story worked out, at least up until 10 years ago or so. But General Motors is funny. Sorry, that's the ceo. Oh, what have you accomplished? Uh, bought back a bunch of stock. What do you want to accomplish? Uh, he sold all these electric cars. We sold like 35 last year, so that's a whole nother thing people can do yeah, whole nother thing, but yeah but yeah, I think the the the whole it's.
Speaker 1:it's wild that pushing stuff on people to satisfy your business model, your investor's business model, is the number one priority. Like let's figure out something that works. I love flat fees too. Like, look, you can use it all you want 10 grand a year, 20 grand a year, whatever and if you use more of it, cool. If you don't use more of it, then do you know, are you comfortable with that?
Speaker 2:yeah, it's fair, totally fair. I mean. I think a really funny thing is a. An example of something similar to that is like employee benefits. Uh, I feel like people in the software like a series, b, series, c company. Um, my, my girlfriend actually. She went from academia to the software side of things and she got like benefits for the first time that were like attractive of like a gym membership and audible and whatever. It was Spotify and it's so much fun to be like hey, I have these things that I'm going to try and get the most value out of it and if I don't use it, that's on me.
Speaker 1:And.
Speaker 2:I think that and and then, when you know, during COVID, when everything shut down and a lot of these companies were like, hey, we're retracting your gym membership benefits and here's cash. And you're like I don't want cash, like I want my gym membership that I can, or my, my lunch thing that I can try and optimize in the right way, yeah, and so it's, it's I, I. I think flat fees, I think usage-based is going to be at least more of the model that goes forward, and I think also pricing transparency too, just like having something on your website that's like, hey, if I buy this, then how much does it cost? And stuff like that, where it's just.
Speaker 2:There's also this level of opaqueness in software sales that is which is why I think customers always want to say, well, what's the ROI on this? Like, they feel like they need to have some. They need the salesperson to help them justify this.
Speaker 1:They want to defend it to their boss when they go ask for money. That's what it is.
Speaker 2:Yeah, absolutely. And they want that salesperson to help them do that.
Speaker 1:Yeah, but they don't measure it. So what's the point? Totally, it's wild. Anyways, all right, sam. Well, it's been great having you on. How can people reach out to you?
Speaker 2:Yeah, Find me on LinkedIn, Sam Cartwright. And there's a website. My partner and I, Dustin. We run a small BB SaaS consultancy called Zero to One Go-To-Market Partners. We specialize in working with pre-seed and seed stage founders, going from that founder-led sales stage all the way to meeting this first sales hire that we've been talking about so much.
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