Building a world-class sales org | Jason Lemkin (SaaStr)

Jason Lemkin created and runs SaaStr, the world’s largest community for B2B/SaaS founders, and is the managing director of SaaStr Fund, a $90 million venture capital firm specializing in early-stage enterprise investments. He is also the mastermind behind two major tech conferences each year—one in the Bay Area, drawing in over 15,000 people, and another in Europe, with a crowd of more than 3,000 SaaS executives, founders, and entrepreneurs. Before SaaStr, Jason wore many hats: CEO and co-founder of EchoSign (later bought by Adobe), vice president at Adobe Systems, co-founder and president of NanoGram Devices Corp., vice president of NeoPhotonics, and a senior director at BabyCenter. In our conversation, we discuss: • How far you should go without a salesperson • Signs it’s time to hire salespeople • Why you need to hire two salespeople • How to compensate your salespeople • How to interview salespeople • When to hire a VP of Sales • How to prevent their flaming out • How to scale your sales org • How to improve the relationship between your sales and product teams • Much more — Brought to you by: • CommandBar—AI-powered user assistance for modern products and impatient users: https://www.commandbar.com/lenny • Vanta—Automate compliance. Simplify security: https://vanta.com/lenny • LinkedIn Ads—Reach professionals and drive results for your business: https://www.linkedin.com/podlenny Find the transcript and references at: https://www.lennysnewsletter.com/p/building-a-world-class-sales-org Where to find Jason Lemkin: • X: https://twitter.com/jasonlk • LinkedIn: https://www.linkedin.com/in/jasonmlemkin/ • Website: https://www.saastr.com/ Where to find Lenny: • Newsletter: https://www.lennysnewsletter.com • X: https://twitter.com/lennysan • LinkedIn: https://www.linkedin.com/in/lennyrachitsky/ In this episode, we cover: (00:00) Jason’s background (06:18) The importance of sales in B2B businesses (11:23) Signs that you should start hiring salespeople (14:19) Attributes to look for in early sales reps (19:08) Hiring a VP of Sales (26:43) The role of a VP of Sales (30:06) Interviewing salespeople (45:16) Determining sales compensation and quota (53:34) Transitioning from 100% commission to a smaller percentage (56:58) Indicators of a hard-to-sell product (59:39) Scaling the sales organization (01:05:26) Understanding sales roles and titles (01:10:02) Product involvement in sales, and vice versa (01:20:32) Thoughts on product teams taking on P&L responsibilities (01:27:23) One thing founders can do to become better at sales (01:31:02) The ideal trial length for a free trial sales team (01:39:50) Closing thoughts (01:41:43) Lightning round Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email [email protected]. Lenny may be an investor in the companies discussed.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Here's the mistake that 99% of founders and sales reps make. We're not really selling in B2B. We're solving problems. Our job as sales reps in SaaS is to not sell a used car. Okay, we are selling a Tesla Model 3 Performance. It has competition. I might not need it this week. Okay, but it's pretty darn good. Let me help you get you into that Model 3 Performance today. And I've even got a special discount for the end of this month. And let me just help you. And I've spent four calls answering all your questions. And I've explained to you all the things and why the supercharging network is better than the regular one that doesn't really work at the charger near your house. And I've gone on Google and I've seen there's no charging network near your house. There's only superchargers. I kind of got you, don't I? And that's the job of SaaS and sales because we're not selling commodities.

• 0:48Lenny Rachitsky?

  Today, my guest is Jason Lemkin. Jason created and runs SaaStr, the world's largest community for SaaS and B2B founders. He also runs two of the biggest town conferences every year. One in the Bay Area, which attracts over 15,000 people, and one in Europe with over 3,000 SaaS executives, founders and entrepreneurs. Before SaaStr, Jason was the CEO and co-founder of EchoSign, which he grew to over 100 million ARR, and then sold to Adobe, where he ended up as a Vice President of the Web Services Business. If you follow Jason on Twitter or LinkedIn, you know how much wisdom he has to share about all aspects of building a successful SaaS business. In our conversation, we focused on what I find most product leaders have the least experience in,

• 1:33Lenny Rachitsky?

  building a sales team. We get very practical and tactical on how long you should wait to hire your first salesperson, what your one to two first hire should look like, why you should actually hire two salespeople, not just one initially, how to comp them, how to interview them, when it's time to hire a VP of Sales, how to avoid your salespeople flaming out and burning through all your cash. We also get into how to make the product and sales relationship healthier, including how to push back on sales and feature requests, why your head of product should be super involved in your sales process, how long you should make your trials, why you should avoid annual contracts and so much more. Jason also Shares advice for running a conference, which I found super interesting. This episode went long because I just couldn't stop asking Jason questions.

• 2:16Lenny Rachitsky?

  But as a result, I'm excited to bring you this incredibly rich episode on building your sales team. If you enjoy this podcast, don't forget to subscribe and follow this podcast in your favorite podcasting app or YouTube. This helps tremendously and I really appreciate it. With that, I bring you Jason Lemkin after a short word from our sponsors. Let me tell you about Command Bar. If you're like me and most users I've built product for, you'll probably find those little in-product pop-ups really annoying. Want to take a tour? Check out this new feature and these pop-ups are becoming less and less effective since most users don't read what they say. They just want to close them as soon as possible. But every product builder knows that users need help to learn the ins and outs of your product.

• 2:58Lenny Rachitsky?

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• 3:40Lenny Rachitsky?

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• 3:59Lenny Rachitsky?

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• 4:43Lenny Rachitsky?

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• 4:59Lenny Rachitsky?

  Jason, thank you so much for being here. Welcome to the podcast.

• 5:03Speaker 00

  Hey, I'm so excited. Long time. What's the expression? Long time fan, first time dialer or something, first time caller. Yeah, first time caller. I don't know if that exists in 2024 or not, but yeah, that's me. So thank you so much for letting me come.

• 5:15Lenny Rachitsky?

  It's absolutely my pleasure. I feel like you're the kind of guy that I knew would be on this podcast eventually, and I'm glad that we're finally doing this. I also feel like we can go in so many directions. I feel like you have so many insights on so many parts of building a business, especially a B2B business. But I thought it would be most interesting to dive deep into building your sales team, essentially trying to help people figure out how to start their sales team, scale their sales team, and all the elements that go into it. How does that sound?

• 5:46Speaker 00

  I think it's great. I think it's it's an evergreen topic, but I think there's remains a consistent set of confusion, fears around how to build the sales team. And it's it's evergreen. The tools change and the the pace has changed. But the issues are like, I love to dig into them because we keep making the same mistakes as founders and executives again and again and again.

• 6:08Lenny Rachitsky?

  100% agree. It's such a black box to me, sales. I've never done sales and I'm always just like, I have no idea what's going on here. And so this is how I learned from folks like you.

• 6:18Speaker 00

  Yes.

• 6:18Lenny Rachitsky?

  You touched on this now. Now I wasn't going to get on this, but I think it'd be interesting, just this question of, does everyone need a sales team? Will you need a sales team if you're listening as a founder?

• 6:27Speaker 00

  Yes.

• 6:28Lenny Rachitsky?

  Is it is it simply if you're a B2B business, you'll need a sales team? How should people think about like, will I need a sales team?

• 6:34Speaker 00

  If you truly build a self-serve product, you can either never have a sales team. Or like Slack defer it, or like Canva really defer it. Okay, Canva didn't really build a sales team until they were well north of 500 million in revenue because it's epic self-serve, right? Slack started all self-serve. And by the time they went public, the majority of their revenue was enterprise sales. So you can sequence things. You can have hybrid models, like, you know, a third of Asana's revenue is still from self-serve and two thirds are from a self-serve motion. So there's all different hybrid things. The most important thing, though, I've found is however you get those first 10, 15, 20 customers, be honest. Be honest.

• 7:14Speaker 00

  And if they, and if you've talked to them as a founder and you know that they need a sales-type motion, they need effort to deploy it, they have questions about security, they have questions about competition, they have onboarding requirements. And you say, hey, I don't like sales, so I'm going to do a PLG motion, you will fail. One of the things that I've done with so many founders over the years, and it chokes them at first, is your first 10, 15, 50 unaffiliated customers, the ones that find you from the ether, they are like the next 50, 100, 200, 1,000. And you can either embrace them or run from them. And too many product-y founders find that, hey, gosh, I'm going to have to do sales, and they exit it.

• 7:59Speaker 00

  They exit it. And I'll tell you, a company I invested in 18 months ago when things were easier, right? Maybe 20 months ago. They were doing 5 million in revenue, growing over 100% with a sales-like motion. Things got harder. Things got harder, as they did for many of us. And they decided to fire the whole sales team, and now they're doing less than one. From 5 million with beloved customers, if I told you the logos, your jaw would drop. Over 5 million 20 months ago to 1 million today because they fired the sales team because the founders didn't like sales. They thought it was icky. They didn't want to do it. They were tired of doing it. And I could tell you several stories like this. So you've got to be honest about the, sometimes we get it just right on day zero. Sometimes we know exactly how our company is going to work, or Lenny's podcast is going to work.

• 8:44Speaker 00

  We can predict the future perfectly. But I find in B2B, a lot of times, the industry we end up winning in, the segment of the industry, the type of customer is not what we initially thought. And either lean into it and be a success, or run from it because sales is icky and risk failure.

• 9:00Lenny Rachitsky?

  When you talk about being honest, is the, what you need to be honest about is that you need sales help to close customers?

• 9:06Speaker 00

  Be honest about that. Just be honest about, yes, the motion that it will take to get those first 10, 15, 20 customers. And if they are able to find you by putting in a credit card and no one had to talk to them, then that's your DNA today. It doesn't mean you won't go up market later like a Slack or a Canva. But if you can get them all to do that and you never have to talk to them, then get really good at viral loops. Get really good at almost B to C type motions. Get really good at this kind of stuff and higher growth hackers and do the whole B, this almost B to C-ish motion, which we have at self-serve. But if your first 10 customers come in and say, you know what, Lenny, I'll pay you $5,000, but you've got to solve this problem I have with online video. That is not a self-serve

• 9:47Speaker 00

  motion. It is not a self-serve motion. And even worse, sometimes worse is your first 10 customers, five of them sign up online, but it takes a huge amount of effort for 19 bucks a month. And then five say they'll pay you $5,000 a month. And some founders are like, I'm going to work on the five that pay us 20 bucks a month, not the five that'll pay us $5,000 a year. And I find too many folks that don't like sales, too many folks that have not had any life experience in a sales-led environment flee from those, those customers. And I've never seen that lead to success. We're surprised who our niche is sometimes. We talk about nailing our niche, but sometimes we're surprised the niche that finds us.

• 10:28Lenny Rachitsky?

  There's a lot of startups I've invested in that start off product-led growth and quickly realized this is just, isn't working. And many of them move to, we need to actually hire salespeople and start to go top-down.

• 10:39Speaker 00

  And it can be, most companies are a hybrid, right? Even big folks that are, even there's weird hybrids. Like there's folks like Mongo and Snowflake. Mongo has a, well, maybe Mongo's a much better example. Mongo has a free, low-end version and, you know, there's open source too. It's a little confusing. And then there's not a lot in the middle. And then there's a lot of big, right? There's all different ways to combine a product-led or self-serve motion with sales-led. And too many founders in the beginning think it's either or.

• 11:06Speaker 00

  It's not either or.

• 11:06Lenny Rachitsky?

  So I think the big takeaway here is, sales is, is not a question of if you're gonna need a sales team, it's a matter of when. The can of examples crazy, maybe that's.

• 11:16Speaker 00

  But they still have one, but they still have one now.

• 11:17Lenny Rachitsky?

  They still have one. I think Notion, I think at 10 million ARR is when they hired their first salesperson.

• 11:22Speaker 00

  Okay, that makes sense.

• 11:23Lenny Rachitsky?

  So I think the question that lives, leads to is what is a sign that you should start to hire your first salesperson?

• 11:30Speaker 00

  Even if you hate sales, even if you think it's icky, even if you don't like it, as a founder, you've 95 times out of 100, you've got to find a way at least to close the first 10 customers yourself. You've got to find a way. And we could dig into how to do that if you don't like sales. The hack though, is that even if you don't like sales, customers love to talk to the CEO. They, the customers love it. And here's the other thing, as a founder, you're really good at the product and the market, hopefully even in the early days. So what I mean, so what's important is, even if you don't know how to do outbound, even if you don't know how to send a cold email, even if you don't know how to do any of this stuff, and even if you don't know how to ask for a check, even if you don't know how to open or close, almost all founders are A plus middlers. A plus middlers. A plus middlers,

• 12:14Speaker 00

  right? And before we started, you and I talked about podcasts and content, and immediately it was an A plus conversation, okay? Maybe you, you don't know how to close a big sponsor, okay, I'm just, I'm just making that up. And maybe you don't know how to find one, but once you have someone in your spider web, Lenny, the conversation you and I just had was A plus, and any founder can, should be there by day one, right? By day one. And, and prospects love it. They, they don't, if I, if I want to buy CRM, I don't get to talk to Yamini at HubSpot or Mark Benioff, but I get to talk to you in your CRM company? It's like magical for early adopters, right? So bear in mind, no matter how bad you think you are as a founder, you're pretty good at the middle part of sales. So find a way to get any prospects, get really good at the middle, and then work up your courage.

• 12:59Speaker 00

  Work up your courage and find how to ask for next steps and, and money. What would it take? Lenny, how can we get going on Riverside? What would it take? We would love to have you, right? What would it take to get you going next week? You've got to learn that little motion, but you don't have to learn all the stuff you think is smarmy, other than how to go from middle to just ask for how we can get going.

• 13:20Lenny Rachitsky?

  I like this term middlers. So just to make sure I understand what that means, like in the middle of the conversation, you're not great at initiating, you're not great at closing, but you could like talk about it.

• 13:27Speaker 00

  Yeah. And this is where sales reps are terrible. Most sales reps, once you go beyond the five basic questions, they can't tell you how a database works, or, or, or, you know, how to, how to eliminate hallucinations from your product, or how to do, or how to do payroll in Eastern, Southern Guam. Like the, the sales rep, uh, uh, we can talk about this, they need help, right? They need help from the founders in the early days, they need help from sales engineers or product people, which is my favorite place to get the help as you scale, but they need help. The beauty to founders is they don't need help in the middle. And you can be 10 times better in the middle than any sales rep at your bigger, at your, your bigger competitor. You, if you're running, I'm just making up CRM, but if you're running a new CRM startup, you can run circles around 98% of the sales

• 14:11Speaker 00

  reps at Salesforce or HubSpot, right? They have the brand, they have the partners, they have the integrations, but they cannot answer the questions you can answer.

• 14:19Lenny Rachitsky?

  Okay. So you close the first 10 customers. What are other signs that, okay, now is really the time we need to start hiring sales?

• 14:26Speaker 00

  I think as soon as you've got those 10 customers and more than 20% of your time is booked up with customers, you need leverage. You need leverage. You've got to get, if you do it too early, if you're not spending 20% of your time in sales and 20% of your time in recruiting, you're failing as a founder. You need 20% of each. 20% in sales and 20% recruiting. Nothing else really matters. I'm at some level as a CEO, maybe not as founders, but as CEOs. But once you cross the 20%, you need leverage or your calendar will die. So you need to hire one rep and you've got to hire two, because otherwise there's no A B test. You have to A B test humans. You have to A B test humans. Um, you've got to hire two as hard as it is. And there's just one cheat code to those first two. There's

• 15:11Speaker 00

  one cheat code. I talked to so many founders that screwed up their first sales hires and they always nod when they hear it. Those first couple reps have to be people you would buy your own product from.

• 15:23Speaker 00

  That's it. Now, we can talk about other criteria. We can talk about normalizing for deal size. We can talk about industry expertise. We can talk about all this kind of stuff. But when you go out as a first time founder, interview 30 reps and you're going to have to interview 30. Okay. And, and 20 are just going to break your brain because they don't do any work and they don't do any prep. And they didn't even go to your website. And then, and then eight of the, eight of the next 10 are sort of okay, but you know, it's not really going to work. But you might hire them if you get tired. And if you're lucky, one or two of them, they're like magicians. They like, they ask the right questions, which we could talk about. Then take a pause and say, look, no matter how strange their background was, whatever they did, it's not the right background. It's not our same deal size. It's not our industry. They actually weren't very good at their last job. They got let go at their last job.

• 16:09Speaker 00

  But I would buy from Lenny. I know I've been doing this for a year. I've been every day I would buy from Lenny because Lenny just explained to me my product and my customers' problems in a way that I actually believe. Forget about what's on her LinkedIn or his LinkedIn. I would buy from Lenny. That rep always works because you can trust them with those leads.

• 16:27Speaker 00

  Almost every first time founder hire, hire someone because they worked at Twilio or CloudFlare or wherever. And they talk the talk and they can say ACV and NRR and, and, and they can talk all these acronyms, none of which matter. None of which matter. And they get so, we all get attracted to logos on our resume. And but in our gut, I always ask them, did you know that Jason was gonna, did you, would you buy from Jason? And like, you're right. I wouldn't have bought, I wouldn't have bought from Jason, but he worked at Twilio.

• 16:55Speaker 00

  So just wait, wait and interview 30 sales reps, however you find them through LinkedIn, through use recruiters, use contingent recruiters. It's exhausting. Do everything, work your network and then be flexible in the beginning. We're looking for pirates and romantics in the early days. We are not looking for folks with massive sales operations teams and enablement teams. You're looking for someone, you're looking for that quirky one that's got a few extra IQ points. That for reasons that make no sense has fallen in love with your little product that is so feature poor and does nothing, but they love it. They love it. They love it. Okay. And my first rep I had like this back in the day, he had gotten let go by a prior startup and he was struggling and he was living in his brother's garage at the time. Okay, this was not your number

• 17:39Speaker 00

  one person at Snowflake, but of all the 30, he came in and what's now Adobe Sign, Echo Sign, he described the whole problem. He described how he would solve the problem for our customers in the early days of this category, right? And it was clear, whatever it took, we needed him and whenever we needed to backfill the garage or whatever, this was the only one that could sell the product and, and he did it for a decade. Closed our first five-figure deal, first six-figure deal, first seven-figure TCV deal, didn't scale completely, right? Inside of Adobe was harder to scale inside of a 20,000 person company than it was in a six-person company, but he was still there. He still made that part of the journey, but he was the only one that I knew could actually, that I would buy my product from. Not that I would buy something from, but I would buy my

• 18:23Speaker 00

  product from. And, and leads are so precious in the early days, right? It's so hard to find leads. That's the problem. You hire this perfect person from Snowflake and you have three leads a month and you give him two and he doesn't close them? Oh, your company's gonna die.

• 18:41Speaker 00

  Leads are so precious. That's what folks don't get. And so wait, and I know it's painful and I know most founders have hired this person with the right LinkedIn that they wouldn't buy their product from. Just keep interviewing. Just keep, you need that quirky, pyrodramatic that loves your product and can sell it. They're out there.

• 18:57Lenny Rachitsky?

  Amazing advice. Wow. There's so much there. I'm gonna follow a couple of threads there.

• 19:01Speaker 00

  Okay.

• 19:02Lenny Rachitsky?

  In terms of the level, I know a lot of people make the mistake of going with a VP of Sales pretty quickly. What's your advice? I know you talked about general attributes, but what's your advice for kind of the level and seniority of this, these first two hires?

• 19:14Speaker 00

  Two things. One, that's evergreen and one that's maybe especially apropos for today's environment. The evergreen one, um, Which I've talked about for over a decade and I think folks that have been through it will see it, which is you need two sales reps hitting quota, closing deals before you're ready to hire a manager for them. Almost all VPs of sales, their job is to take you from rep three to 300, to take you from three to 300, to take something that's just, just starting to repeat, okay? A script that's just starting to work, leads that are just starting to come in. And then take Lenny and Jason, the two reps I have, as quirky as they are, they're crushing it, okay? And then I'm gonna hire a more heterogeneous type of person going forward. I'm gonna hire the person from CloudFlare into it.

• 20:00Speaker 00

  I'm gonna, they can't all be like Lenny and Jason, they're pretty quirky. But at least I can learn from them. What's working, what are the objections, right? How do we get around that feature gap? Like, we're one year, we're two years old, we've got a lot of feature gaps, okay? Our product, we, this integration doesn't quite work. How do we box around those issues? How do we sell our 10x feature? Like, because if you're a startup, your product isn't very good. Your software is not very good and you have a competitor, but you have some 10x feature that is driving people to buy you, something you're doing that does not exist in the marketplace. And the really good reps get insanely good at selling that. And the folks off the street that do VPs of sales often doesn't even understand the 10x feature. It's too subtle. It's too subtle why the fact that your product is localized in Portuguese magically

• 20:42Speaker 00

  means you can win these deals, or I'm making up something that doesn't quite make sense. But, so you need two reps that are hitting quota and then you hire VP sales. If you hire it before then, you're, you're doing a hail mary.

• 20:54Speaker 00

  It ain't gonna work. It never, ever, never, ever, ever, never, ever works. You're asking them to find product market fit, to be the first rep, to be the second rep, and scale it all at the same time. It's mission impossible to do all four at the same time. Right? So that's the biggest mistake is, I, Lenny, I can't get sales going at my company. I can't do it, but I raised $4 million in my seed plus round. I'm gonna go out and hire the VP of Sales. That VP of Sales will not be there in eight months. And you know what else? Two million of the four will be gone. Cause they'll never understand the product. They will never understand. And if there was one thing that, there's so many things we could talk about, but if there's one thing I could reinforce for this audience, it's that, you know, that early sales team, they've gotta be product gurus for your product audience. They've gotta be product experts.

• 21:38Speaker 00

  And later as you scale, they can't be, or you can't scale.

• 21:42Speaker 00

  You know, when I started, when I came out of my own startup and started interviewing other folks, I remember I would interview a lot of folks at places like GitHub back in the day. I'd be like, are you have a technical background? Like, are you an engineer? Have you ever built any software? They're like, no, I don't, I don't know. I don't know. And I like, I was curious how you could do it. But GitHub was so well established that it's 10 questions. It's 10 questions and grab a sales engineer. It's 10 questions and grab. So you gotta be really good at 10, then you grab a sales engineer. That doesn't work in the early stage startups. So you've got to find these sales folks that are a bit of product savants and dropping the VP of Sales in that isn't a product savant, which is a big issue. That's all Mr. Or Ms. Process. This is the issue. They're all Mr. Or Ms. Process.

• 22:23Speaker 00

  Okay. So the second point I wanted to make, and I was on the fence for years of when you hire a VP of Sales, do they need to carry a bag? Do they need to sell themselves or not? Does it matter? Does it? And I wasn't sure for a long time. And the reason I wasn't sure for a long time, it's not that you don't want a VP of Sales carrying a bag. And I do think a VP of Engineering also should commit code.

• 22:43Lenny Rachitsky?

  And carrying a bag, meaning close sales themselves.

• 22:46Speaker 00

  Yeah, not just be a boss. Not just be a boss. Yeah, have a quota. And the reason I was on the fence was because I was like, well, listen, in theory, it's great. But let's say you're a hot startup and you want to go from two to six this year. Okay. So I want to add 4 million in new bookings. And let's say I can do 400K in quota per rep. That means I gotta have 10 reps. She walks in with two. I got, I'm at a race, aren't I? I gotta hire eight in the next six months to hit my plan. And I gotta put numbers on the board. If I'm gonna out there as an individual contributor, sales rep, I'm never gonna hire eight people, am I? It's never gonna happen. So I used to say, I don't know if it matters. But what I've learned the last 18 to 20 months, when everyone has gotten lazy, Lenny, everyone in tech has gotten lazy, is I see way too many VPs

• 23:31Speaker 00

  to sales that come in and never have any idea how to sell the product. Never. Never. They only want to be managers. Now, whether they carry a bag, or whether what they do is they join calls with the reps, right? They back, whether they backfill the reps, you want your VP of Sales in deals 20, 30 hours a week when they start. And I see VPs to sales today start, there are no deals. I'll go to a board meeting, and VP of Sales will be there two, three months, and they'll have a logo on the word. I'm like, how's it, how's it going with Airbnb? And they'll be like, I don't know. I gotta ask John. Doesn't know because it isn't, isn't even in the deal.

• 24:05Speaker 00

  Isn't even in the deal. So I see this too often. Another company I'm on the board on, I really like this VP of Sales a lot. He joined and six months in, you know, sales were down from where the new bookings were down from where they were six months before. And as he says, honestly, like the biggest problem is I feel like I didn't have time to learn this product. It's a complicated product. It's more complicated than the product I last sold and I just didn't have time.

• 24:29Lenny Rachitsky?

  Jason, this conversation is going exactly how I'd hoped. There's so much actionable advice here. Let me try to summarize a little bit of the things you've said and then keep going. So let me know what I'm missing here. I'm going to try to just highlight some of the important things you mentioned. So in terms of when it makes sense to start hiring your first salesperson, a couple of things you shared is you've closed the first 10 customers on your own as founders. And if you're spending more than 20% of your time on sales and you need to start creating more leverage. Uh, I'll throw in one other thing I've heard and just to tell me if this is also true, that there's kind of a repeatable process if you create it, like you can sell consistently enough, or you can tell someone, here's how I've been selling. Is that, is that right?

• 25:08Speaker 00

  Yeah. If you hire a VP of Sales before then, it's approaching a hundred percent chance of failure.

• 25:13Lenny Rachitsky?

  I see. So you can hire the first two reps before you're like, here's a pretty good process that has worked for me a number of times.

• 25:19Speaker 00

  Yeah. I mean, listen, it's hard, as hard as it is for a lot of founders to even get their arms around, the reason is, is you've got to be that crummy first head of sales with them. You've got to manage those reps. You've got to be in the field with them. You've got to be figuring it out before you can hire the person. You just have to. Even if you're terrible at it, because you're still going to be a good middler.

• 25:39Speaker 00

  You're still going to be a good middler.

• 25:41Lenny Rachitsky?

  Okay. A few more things that stood out to me. One is hire two sales reps immediately, not just one. These reps, you need to interview about 30 people. Eight will be like pretty good. 20 will be terrible. Two are going to be, these are people you can see selling your product and you would buy from them. And they're often very quirky and not maybe a traditional sales background. They've never been VPs of sales, essentially. They're more like AEs and things like that historically, or maybe not even salespeople historically. Is that, is that right?

• 26:10Speaker 00

  I think you will regret it if you don't hire these first couple of sales reps that have a couple of years of experience. If you're in B2B with B2B sales, they need a couple of years of experience and they need a certain amount of maturity. And maturity is a real issue in these or in any early hire because we just don't have time to babysit people. There's no onboarding, there's no training, so they need a couple of years of experience. Ideally, something close to your deal size, we could chat about why, that would be nice. And enough maturity that you can trust them with that lead, you can trust them with your customer, right?

• 26:42Lenny Rachitsky?

  Okay, and then you hire a VP of Sales once you're ready to go from three to 300 reps. Your advice is also give the VP of Sales a bag slash a quota slash they need to be doing sales themselves in today's world.

• 26:56Speaker 00

  At least, at least for a little while. And, and more importantly, I, if they don't want to, I think today, in today's world, you gotta run from them. Exactly whether they fully carry a quota, a half quota, whether they backfill the sales team. You want a salesperson, and here's the thing, Lenny, you want to sell, this is gonna sound silly, but it's not. This, trust me on this for anyone watching, listening. You want a head of sales that actually wants to do sales. And I gotta tell you, and I'm still struggling with this myself, after the last three years or so. So many folks in all functions, we could talk about other functions too, okay? But especially in sales, don't want to do sales anymore. They don't want to do it. They don't want to do it.

• 27:39Speaker 00

  2021 was crazy because everything was too, too crazy. There's too much money, too much going on. 2022 was the knife falling, that was crazy too. 2023 was just hard, okay? And whether it's burnout or whatever out, or just too much of a, of a, too much change. I would say, I've probably interviewed for different reasons, 50 VPs of sales in the last 12 months. I would say the majority don't want to do sales. It's my first screening question. And that's why they got to carry a bag because it proves they actually still care about the craft. And the best sales folks love sales. It's a craft. They love money. Yes, they love money and that does matter. Do not hire a sales rep that doesn't like money. Trust me on this one. That there's 0% chance they'll work out either.

• 28:24Speaker 00

  But they also like the craft. They like honing the script. They like beating the competition. They like figuring out the counterfeit. They like figuring out the weapon and the 10x feature. They like working on a team. They like hunting. They love it. But then sometimes I just think burnout is always a reality, but I just think that the last three years have been so yo-yoed that folks are just, they're out.

• 28:47Speaker 00

  They're out and don't hire them, no matter how smart they are. And that's the test. I'll tell you, I talked with a really great VP of Sales candidate that had worked with a top 10 tech company. And I asked him what he wanted to do in this next role and he's like, yeah, I got a great team. I've got eight people that I can bring with me. We're ready to lock and load. I'm like, okay, well, let me tell you, one of my views in today's world is that you've got to actually visit more customers now, not less. In a distributed world, it's more important to visit customers. And he lived in the East Bay in Pleasanton in the East Bay, which is maybe 20 minutes east of Oakland. He said, I'm willing to visit customers, but I won't go as far as the peninsula in San Francisco.

• 29:29Speaker 00

  He's just happy at home. He's happy at home, Lenny, and he don't want to sell. And this guy has the best LinkedIn and the best references, but you don't want to sell anymore. He needs a job. He wants to be a VP of Sales and I see this across the industry and I'm struggling to find answers. And I think the biggest hiring, we talked, we talked about a lot of tactical hiring mistakes that you can make today in sales. The biggest strategic mistake you can make today in sales, because there's so many veterans. There's so many folks that worked at Twilio and Mongo and wherever, pick any, any great company you want, right? There's so many veterans out there. You just can't hire the ones that don't actually want to sell anymore and there's too many. There's too many.

• 30:06Lenny Rachitsky?

  You mentioned that you actually just asked them in the interview, the first question is, do you actually want to sell? What other questions do you ask for either? Let's go through both. You said you have these questions that you ask for the early hires and then the VP of Sales. What are some tips for people when they're interviewing these folks?

• 30:21Speaker 00

  It's interesting. VP of Sales of VP of Product, I look for the same answer. One of the Colombo style questions I ask them, and I mean, I mean, it's so, it's barely even counts as a question. Is what do you, what do you want to do your first 30 days? What do you want to do? Actually, I usually ask, what do you want to do your first two weeks?

• 30:37Speaker 00

  And in B2B, if I don't hear from the VP of Sales or the VP of Product that I'm going to go meet customers, out, I'm out. There's too many VPs of product too, Lenny, that don't want to meet customers anymore either. The majority of VPs of products that I interview, they don't, they don't say meet customers. Every single great VP of Product, Chief Product Officer I've ever worked with in my entire career. You know what the first thing they do in the first two weeks? They're like, leave me alone. I'm going to go talk to 20 customers. Leave me alone. Leave me alone. I'm going to go talk. They don't want to sit out of meetings and look at PRDs and talk out of their navel. I'll do endless internal meetings, all the best ones. They say they just leave, they literally say some, leave me alone. I will see you in two weeks. I'm going to go meet with 20 customers.

• 31:20Speaker 00

  And that's what products should do. Sales, whether it's prospects or existing customers, it can vary, right? But they should be like, I'm, my first day, I want to join five calls. And when you hear that story of, I don't want to travel out of Pleasanton, or they say, here's what you're going to hear from the wrong person for anything, even up to 50 million in revenue. I'm going to spend that first month working on process. I'm going to spend that first month getting, getting Salesforce up and running. I'm going to spend the first month on territory planning, Lenny, because we really, with our three reps, I really want to make sure we've nailed territories, right? Lenny will do the South, Elaine will do the East, Jason will do the West. When you hear process, process, process.

• 32:01Speaker 00

  From any, from marketing, product, sales, customer success too, boy, it's the death of customer success. It's just people, and it's not that you don't need process. It's, it's just, it's even worse than it was than a few years ago. And I know this is going to trigger some people, but the truth is they don't want to work. They don't want to work. They don't want to work. I literally just got this LinkedIn email to work with me at SaaStr from this from this person who's been reading SaaStr for eight years. You're like, I want to run account management customer success for you. Here's what you're doing wrong. Here's how to do it. I'm like, oh, this is, this is pretty good, right? And I, and I, and I DM'd her back. I'm like, great. To be honest, you realize that you're actually going to have to talk to customers and sponsors yourself in the beginning.

• 32:42Speaker 00

  No response. Just out, just out. And that was the best one I got the last thirty days. That was the best inbound that I personally got. So I know it sounds triggering or critical, but as founders, we have to be honest that there's this vast pool of veterans with great LinkedIn's and great resumes that are so burnt out, Lenny. And let's not blame them. I know it sounds like I'm blaming them or being negative and, and I'm trying to not be negative. I'm empathetic. I am empathetic to the burnout, but don't, you can't hire these. There's too many. The industry is littered with the burnt out. They're littered with it. And if you hear a touch of cynicism, if you hear anger, if you hear, I don't want to meet customers in any of the, and I'm going to say any VP role,

• 33:24Speaker 00

  product, sales, marketing, customers. If they don't want to meet customers, their first, let's make it a fourteen day test. You know, they're never going to want to be customers.

• 33:33Lenny Rachitsky?

  These folks that don't want to do sales, that are VPs of sales, I imagine when you're further along, that's more okay. Cause you don't need them to be doing sales, right? They want to manage, optimize. No, I see you shaking your head.

• 33:45Speaker 00

  I mean, okay, you think, okay, there is an element, let's call it north of fifty or a hundred million, where for what's sometimes called commercial sales, SMB sales, it's, it really is all process. Okay? So for sure, I agree, but you know, at Salesforce, they're trying to close hundred million dollar plus deals. You think that the, the sales leadership doesn't need to be in those deals? You think they can just hit refresh on the dashboards and track them from home? No, Marc Benioff today is still flying to meet customers. He said the other day, you know, why does Marc Benioff go to Davos? Right? He sits, and I've never been to Davos, he sits at the same place at the top of some staircase.

• 34:25Speaker 00

  Okay. And Salesforce drops millions of dollars and he waits to meet customers, prospects and partners in person all day because it's efficient. Because it's efficient because he can do 50 or 100 customer or prospect meetings a day at Davos. He's still doing it at 30 something mil billion in revenue. Right? So this idea that is there some truth at, at, at like, for example, when I worked at Adobe back in the day, there it is true that Adobe, which was, you know, the parts of the business, you know, sales literally was not dashboards. Like, I get it. Okay. At four billion, 10 billion in revenue, but most of your audience is not ready to hire at four billion or 10 billion in revenue. They're not ready to hire that person. Um, don't hire them. Right?

• 35:08Lenny Rachitsky?

  And I don't know, maybe Satya is listening. You never know.

• 35:11Speaker 00

  I think, and I think, I still, but I, I think on the sales side of the business, um, they're, they're flying out to the big deals.

• 35:17Lenny Rachitsky?

  To close the loop on this thread, uh, when you're interviewing the early sales reps, those first two quirky folks, what are some questions and ways to know if there may be a good fit? You mentioned one of like, you feel like you would buy from them.

• 35:30Speaker 00

  Okay. The one, the really the simplest one and, and early in my career, I thought this was silly or hated it. This Glengarry Glen Ross, I don't know if it was Glengarry Glen Ross or that, that, that toxic Leo movie about sales, which is still entertaining. But what? Yeah. One way or another, Lenny, it's got to be sell me this pen. But it's not sell me this pen, it's sell me this app.

• 35:51Speaker 00

  So I don't like surprises. I don't like games. I like to do this in a second interview or whatever. Give them time and I don't like to judge too harshly, but it, whether it's the first interview or the second, they got to sell you this pen. They've got to put in the 30 minutes of work and maybe it's two hours. But here's the thing, today's world, you can go on YouTube or someone's website, there's an explainer video for every product under the sun, isn't there? I am shocked how many salespeople I have met, Lenny, from SDR to SEB of Sales, that by the time, and I'm doing an interview for like a portfolio company, this isn't a screen interview, they haven't even watched an explainer video yet. I could be the fifth or eighth interview, and they don't know how the product works. They have not even gone to the effort of searching YouTube

• 36:35Speaker 00

  or the homepage and watching it. And forget about explainer videos enough, but so many companies do webinars now and they publish them on the, like, really good stuff, customer testimonials, right? If you're a sales rep, you don't actually have to know how the weblogs work or how to provision an API key, but you need to know the product as well as that webinar that's on YouTube. And 98 out of 100 folks won't bother an interview. They won't bother. They're just gonna click on apply on the ATS and tell you, "Hey, I recently stumbled upon whatever. It looks like you have time to discuss," right? But that one that actually does enough work and watches the video and then can sell it to you, and they're gonna make mistakes. They're not gonna get it right, but

• 37:17Speaker 00

  they have enough confidence with the core problem to be solved because here's the mistake that 99% of founders and sales reps make. We're not really selling in B2B. We're solving problems.

• 37:32Speaker 00

  And this is why so many people are struggling in 2024, because they can't solve their products, as sales reps, as companies, they can't solve big problems anymore. Our job as sales reps in SaaS is to not sell a used car, okay? We're selling a Tesla Model 3 Performance. It has competition. I might not need it this week, okay? But it's pretty darn good, okay? And I'm gonna help you understand, Lenny, because you're in the market for the car, why this is the best one. I'm gonna be honest about where it's not. I'm gonna answer all your questions. I'm such an expert. And then I'm gonna ask you, Lenny, when is that, how much, you have 280,000 miles on the Civic? What, let me help you get you into that Model 3 Performance today. And I've even got a special discount for the end of this month. And let me just help you. And I've spanned four calls answering

• 38:16Speaker 00

  all your questions, and I've explained to you all the things and why the supercharging network is better than the regular one that doesn't really work at the charger near your house. And I've gone on Google and I've seen there's no charging network near your house. There's only superchargers. I kinda got you, don't I? And that's the job of SaaS and sales, because we're not selling commodities.

• 38:36Speaker 00

  We're not, and that's why the best reps will also tell reps when not to buy their product. As painful as that seems in tougher times in 2024, the best reps say, no, you know, we're not there yet. We're not the right, if you need this feature, if you need this integration, I want you back in six months. When you use this big product that isn't that great, but today we're not the right solution for you. That's the best ones do that. They have the confidence to know the close it. And the rest of the world thinks this is like some sort of adversarial transactional thing, and it's not.

• 39:07Speaker 00

  Right? Software, I think hopefully all your audience would agree, when it's done right. Software is magical. It solves incredible problems, incredible problems. What Airbnb does, what Uber does, what SaaS does, things solve, I can track my customers. I can manage, I can automate my communications. It's magical. You shouldn't have to use boiler room tactics and use car tactics when you have something, but it doesn't sell itself. Except for a little while in late 2020, early 2021, that screwed the whole world up when products actually sold themselves.

• 39:41Lenny Rachitsky?

  I feel like this is a separate podcast we should do of just how to get better at sales and how to sell. But I feel like that's its own hour of conversation. I did a great episode with April Dunford where I don't know if you follow her stuff, but she essentially describes exactly your approach of help people understand the market, like help them understand the entire landscape and then talk about your problem. So anyway, we'll link to that episode. It has a lot of good advice there. In terms of this interview, selling me a pen approach to give people something very concrete to do, like how do you actually set this up? Is it like, sell me your product and then they put together a pitch for your team and then like they pitch you on the product?

• 40:18Speaker 00

  I'll tell you until like the boom, until everyone in late 2020 got so desperate to hire anyone with a pulse. Almost everyone in sales had to come and they had during an interview process, they actually had to do the pitch. They would come and you used to do it in person with this screen. You can do it on Zoom now. It really doesn't matter, but do it for real. Do it for real and everyone would see. And everyone in recruiting changed, people stopped doing reference checks, they stopped doing these tests and they would just hire warm bodies late 2020. I can tell you a funny story in a second and it was okay until it wasn't and our, our, our hiring processes have not reverted back to pre-March 2020 and I think it's failing founders left and

• 41:03Speaker 00

  right. Failing, I can't tell you, I would say 95% of the hiring I see out there, people don't do reference checks anymore, Lenny. And we can talk about when they work and when they don't, but no one does them. No one does them. No, how, you're going to invest so much, and forget about the, the, the salary, it doesn't really matter, so much time, your, your, your time, your leads, your, everything's so precious to bring Jason into your company and you're going to go through all this recruiting process and you're not even going to do any reference checks? People don't even do reference checks and they don't, they stopped doing, do me this demo because they were so worried that rep would go to gusto, would go to deal, it would go to remote, there was no time, I gotta get, like this SDR has 50 offers, Lenny, we gotta hire this SDR with three weeks of experience, we've got to decide

• 41:47Speaker 00

  today and that's the way, and hiring has not come back. And you're just, those, if those hires bounce, not only is it bad for you, but it, it's a disservice to the, to the, it's worse for the hire. I mean, that cloud, that poor CloudFlare woman that blew up, right, with the, with the thing, like, there's so many issues there we could dig into, but it, it's all CloudFlare's fault for hiring her. Okay, let's forget about that, she didn't close a single deal, okay, so objectively, in sales, should you retain your job if you, in sales, if you can't close a single deal, like, I don't want to get into some of the triggering things, but remember, if you hire someone and they fail, it's all your fault. She didn't know what she was getting herself into, your, no candidates can do enough diligence

• 42:28Speaker 00

  ever, there's not enough time, there isn't enough time. And, and this is true all the way to the top, right? And so, when, as an investor or a board member, it's funny, when I do interviews, I do this thing at the, I try to be the last interview sometimes and the founders don't want me to do it, they want me to, to, to sell, right? I want to be the last one and what I want to do is when, Lenny, you've decided to join Ellen at her startup, right, at the end, I said, look, Lenny, you got, I've talked to Ellen, she loves you, you have the job. You've got the job. What I don't want you to do, Lenny, is bouncing three months after. So let's slow down. Let's talk about the questions you have on your mind. And let's have a safe space where we can make sure you're going to be happy and successful there, right? And sometimes even the founders get mad at me for doing this because sometimes the candidate fails.

• 43:14Speaker 00

  But I'm like, I know you're mad at me today, but this is, you know, you, it is your fault. A hundred percent your fault if any of your hires fail. Don't blame them and I'm guilty of this. I get upset when, when people start and they don't give it their all, right? Or they don't do it or a high, you know, um, I mean, uh, you know, what if you hired someone for your podcast and they decided, you know, I don't want to do the podcast, the podcast this week. I'm, I'm tired. I'll do it next. You're so mad at them, but you, you should have seen it during the hiring process. Right? So tying it back, that's why you've got to do the, sell me this pen. You've got to before you have, hire the salesperson, have them sell your product real, do the demo.

• 43:53Speaker 00

  And if they need more time, give them more time. Let them watch another demo. Don't, don't, don't have them feel like it's a trap or spook them. Treat them the way you would like to be treated. But if you skip this step. I mean, you know, it's, it's, it's, what's the point? You're not helping them.

• 44:08Lenny Rachitsky?

  What I love about this process is it connects exactly to what you recommended you look for in these hires is would I buy my product from these people? So this makes a lot of sense and you give them this assignment at home and they do work on this and they come in, right? It's not like come to the office.

• 44:21Speaker 00

  If you talk to a great transactional VP of sales that's hiring tons of reps to do it, like they'll make, they'll make them do, if they're still, if they're still doing this, they'll make you do sell the pen fast in the process. They don't have time. They're doing 20 interviews a week, 30 interviews a week. You've got to sell me this pen. But if you're a founder and you, and I'm talking about, you've already talked to a bunch of candidates, you're down to one or two. Make them, tell them, look, this isn't a trick. I'm not that great at selling my product yourself, right? But we, I gotta know that you're going to be happy and successful here. So do a demo for me. And if they won't do it, they're not a salesperson. They're not, and too many people went into sales not, the other weird thing about B2B sales in good times is actually a lot of these folks are not really what you might think of as salespeople. They can't do outbound. They can't pick up the phone. All they know how to

• 45:05Speaker 00

  do is to manage leads that come in and say, I want to buy today. And you need those people too. Okay. And I'm not saying you don't need those people too. But that's not always what we think of as sales.

• 45:16Lenny Rachitsky?

  Another black box for me, and I think a lot of people with sales is comp and quota. How to actually set up their comp for your early hires and then how to actually decide on a quota. What advice do you have for figuring that out early on? Like what percentage of commission, what percentage of salary, all that?

• 45:30Speaker 00

  Yeah, everyone gets this wrong. Um, we worry, look, at scale, when you're extremely mature, extremely mature and very profitable, you really got to tweak this stuff very carefully. Okay. And we could talk about that if that's relevant. But in the beginning, we get this all wrong. What matters is can a sales rep close more than they, than they take home?

• 45:54Speaker 00

  In the very beginning, that's all that matters. It's just you selling, right? The first three months of a new rep, you're, you're lucky if they can close as much as their take home pay is, their OT, okay? And so in the really early days, my early, early day comp plan is look, your first three months, you, you keep a hundred percent of what you close. Of course, that's not profitable for the business, but you got to invest in them, right? You keep a hundred percent of what you close. And if, if you have enough going on in your business, usually that's enough to put, to put supper on the, on the stove.

• 46:24Lenny Rachitsky?

  And that's without a salary?

• 46:26Speaker 00

  No, no, you pick an OT, a salary, but you got, okay, let's step back for a minute. You gotta pay market. You gotta pay market. And this, in the early days, if you're bootstrapped or really, this stresses folks out. Like, I, I just talked to this great rep, but, but he wants 150K OT, right? And in fact, it's a step down. He had 170K at Slack, but he knows this isn't a startup. He wants a hundred, he might take 140.

• 46:52Lenny Rachitsky?

  And OT is total comp, overall.

• 46:54Speaker 00

  Total comp. And the founder panics. I don't have, I'm only making 60. How can I pay 140? Well, let's break it down for a minute. First of all, let's be tactical. It's usually 50/50, right? 50% base, 50% bonus for a sales rep. So they're really only taking home a 70K base, trying to make another 70. Okay? And then 70 divided by 12, help me do my math. It's not quite 6K a month. Well, maybe with taxes it is. You're really only paying 6K a month for a couple of months to see if this experiment works out. You're investing 20,000. You don't have $20,000 to do sales? Then don't do sales. If you can't find $20,000. So people freak out too much about this top line number, this, this, this base and bonus, the on-target earnings, OTE.

• 47:39Speaker 00

  And they're not more practical about what am I committing to cash upfront? Two, you need a plan where it's a win-win. So if you, this person makes 140, but ultimately, ultimately a sales rep's got to bring in four to five times what they take home. Okay? So that 140's gotta be 500, 600 or more. The more enterprise you are, the bigger the multiple has to be and the, and the higher the comp. But it's gotta be three to five X at a minimum, three, three X for small businesses, four X for mid-market, five X. You've gotta get there. But you don't have to be there on day one and two. When you get there, the rep should be accretive, shouldn't they be? If they make 150 and they bring in 450, unless your marketing costs are out of control, which can happen, but that's not sales fault, is it?

• 48:24Speaker 00

  If your marketing costs are reasonable and you pay a sales rep 150 for closing 450, if you engineer your plan right, you should be smiling, not frowning. Where it gets tough is when you have a ton of folks not closing. When you have a lot, when you have a ton of folks not closing and you have extremely high marketing costs, then it all breaks. Your CAC breaks, your, your payback period breaks. But if you have inbound leads, if you have demand and you have sales reps that can sell you this pen, they're going to be accretive, Lenny, because of that math. And don't take the pressure off. Don't make them close 5X their take on their first quarter. Make them close 1X. Let them put points on the board. Let them eat. And so negotiating, here's the point, if you think about it, negotiating someone down from a 150K OTE to 130.

• 49:10Speaker 00

  It's not going to make any difference. You want them to close 600 or 700. It's not going to matter. At scale, does it matter? For Mongo, maybe, right? Maybe. But you want, what you care about is how much can, how much more can they close than they bring in? And then you, that's why you want them to make a lot of money. You want them to be rich. You want them to take home a lot for a whole bunch of reasons. And so don't freak out about the acronym OT, what they take home. Figure out what it's really going to cost you. And would you buy from them? And if you would, they're probably going to bring in more than they take home. Right? And on the marketing side, like in their days, you're lucky if you can find a marketing channel that is that accretive.

• 49:49Lenny Rachitsky?

  Amazing. Okay. So just to summarize, you start a salesperson with, say, 75K in salary and then say 75K in expected sales and they take

• 50:01Speaker 00

  Bonus, bonus.

• 50:02Lenny Rachitsky?

  Bonus.

• 50:03Speaker 00

  From sales. Yeah.

• 50:03Lenny Rachitsky?

  Bonus from sales and the idea there is they take a hundred percent initially of their sales for the first month or two. Just to make it feel amazing. They're making money.

• 50:12Speaker 00

  Yep.

• 50:12Lenny Rachitsky?

  See how they're doing. Don't put a lot of pressure on them. And then the plan is over time, get it to a point where they're bringing into the business four to five times what they're taking home in terms of

• 50:23Speaker 00

  Yes. Yeah.

• 50:24Lenny Rachitsky?

  Do you set expectations every month or two? We were going to, or is it every quarter? We're going to revisit your comp and quota and adjust.

• 50:31Speaker 00

  If you get it right, you never have to revisit it. Not for years. I mean, I'm using the same sales comp plan I have for a lot of years. It still works. Listen, you can make tweaks. Okay. And you've got to listen and we're all human beings and people. And again, remember your sales team has to eat. They've got to eat. Okay. And you've got to be somewhat competitive. But there's only so much you can tweak, Lenny. I mean, they have to bring clothes more than they bring home. Right? And so you can make tweaks at the margin. The problem is if you make too many tweaks to this model, you burn up all the cash. You're, you're, you're trying to plug a leaky boat. There's no point. There's no point. There's no point. And remember, related to this, for a long time, for most folks.

• 51:11Speaker 00

  Unless you're, even if you're hyper funded, you're better off with fewer, better reps than more reps. There is a stage when you get big enough where this concept of capacity planting really does matter. When if I got to go from 50 to 100 this year, okay, I'm at 50 million. If each of my reps can do 500K, I need 100, don't I? Okay. And literally, if you have 20, you mathematically cannot hit the plant. So there's a certain truth at scale. In the early days, it's, this is a rookie error. Like, I'd much rather have two reps each closing a million, right? Then 20 reps struggling to close 100K each. Like culturally, it's terrible. There's no domain knowledge in the company. Everyone's miserable, everyone's fighting. What you want to do in the early days is concentrate your leads and your best closers.

• 51:54Speaker 00

  At the same time, bring new people up, but you've got to concentrate your leads to your best closers. And that means year two, year three, year four, they should be making a lot of money. Lot of money, sometimes too much. I remember the first investment I ever made was a company called Pipe Drive, which sold for a billion and a half. You know, SMB CRM, and I put in the first sales rep there. He used to work for me and the founders got mad at him. They got mad at him because in three months, he was making more than any of the founders. They're pissed. I'm like, guys, I know we're, we're have different backgrounds and cultures, but this is what you want.

• 52:28Speaker 00

  But it took them a long time culturally as self-serve. Cause Pipe Drive was 100% self-serve at the time. They'd never had a sales rep and I put the guy in. And what he did was he, when he looked all these self-serve customers, he's like, it was, this was, the company was at about 2 million revenue at the time. And he's like, okay, who's bought more than one seat? He just did a reverse sort. And he called them. I remember he called AOL back in the day. And he's like, you guys have 20 seats at Pipe Drive. Would you like to buy more for your sales? And they're like, thank you very much. We'll take 100 seats. And he just went down the list, from the top to the bottom. And he took home like 20% of those deals. Now that difference, that extra 80 seats at AOL, he brought it in. So Kim, keeping 20% of that is a great deal for the company, right? But he was pretty good at it and he was the only person for a while.

• 53:13Speaker 00

  So he made hundreds and hundreds of thousands of dollars when the poor company, the founders were paying themselves like 50.

• 53:20Lenny Rachitsky?

  So your advice there is don't be sad if your salesperson is making tons of money.

• 53:24Speaker 00

  A good, if you architect the simple sales fund we talked about and they're making a lot of money, you're making a lot of money and your equity is worth a lot of money.

• 53:31Lenny Rachitsky?

  Yep.

• 53:31Speaker 00

  Your equity is worth a lot of money, right?

• 53:34Lenny Rachitsky?

  When do you make that switch from they're taking home 100% of it, they're selling to smaller percentage?

• 53:40Speaker 00

  Look, some people are going to think it's goofy what I said about 100. I just view it as a simple ramp. You could do, I think you do it for one quarter max. One quarter. The, the problem is if you let this go for too long, more than a quarter, like if you make it too easy for long a quarter, the problem is the mediocre lean into it too much. And that doesn't help, not only does it not help you, it doesn't help them. You don't want, you don't want to make mis-hires. They're so damn, I mean, you could have a whole podcast on it just on mis-hires. Like it's probably the single most important thing in scaling startups is not hires, it's mis-hires. But if, if it's a tragedy if you mis-hire a rep, but you don't want them there six months, it's not good for them either. You want to, you want to support them. You want to help them find a place where they're successful. And here's the quirky thing on the mis-hires.

• 54:23Speaker 00

  And this is why that first guy I hired was mid-pack at that, like he was less than mid-pack. Here's the thing about sales is, you know, someone can be very good in certain sales environments and completely fail in other ones. Completely fail. It's probably more binary than any other function. And so you've got to find it before you hire them and, but you also got to root it out fast because those leads are too precious. And it doesn't mean they won't go on to another company and be wildly successful, but you, you could utterly fail. And the one related point I'll give, if I had to be, if I had to throw one hint on this first, any of these reps, first 10 or V and VP of Sales, one hint more than anything else. Trust me. You gotta hire someone whose last product was harder to sell.

• 55:08Speaker 00

  This is so important. This is a recipe for utter disaster.

• 55:15Speaker 00

  If you take someone in sales and their last product was easier to sell, they will have none of the skills to sell your product. But this is the mad, and I'll give you a story, an example in a second. If you hire someone from something that was just a smidge harder, a smidge harder to sell, and they come into your company, it's like they're on Mars. It's like weight has been released from their feet. Like they learned how to sell a harder product and get it done. And then they come to you. And the first example I had, the first SDR I hired was a guy named Sam Blonde, who went on to be CRO at Brex and, and then now is a partner founders fund. And we worked together from the very beginning, first SDR. And he came, before that, he was an SDR at a company called Intact,

• 55:59Speaker 00

  which was bought for a billion, which was online of financials. Okay. And back in the day, no, we know what the one thing people didn't want to put in their cloud was? Their, their financial statements. Okay, it just wasn't trusted that there are some things you would trust to the cloud, like a CRM, but they'd be like, these are my crown jewels. I can't put these. So he went from desperately trying to convince folks to do, to move a business process cloud. They had no interest and he came to us. And it was hard, but it wasn't that hard. And he instantly was number one. He went from SDR to SMB AE to mid-market AE to director of sales to head of this whole set. Because, and then there are many reasons he was great, but he came to me and I said, Sam, why are you, why are you crushing it when everyone else here is struggling? He's like, this is much easier than Intact.

• 56:43Speaker 00

  So hire someone like that and don't make it, no matter how much you like them, the sell me this pen thing will control for it a bit. Okay. But when we give, we give, we give in the hiring process, right? We never get what we want. Be very, very careful if the last product was easier to sell.

• 56:57Lenny Rachitsky?

  I love this advice. What is a heuristic that the last product was harder to sell than yours? What tells you that that's probably true?

• 57:04Speaker 00

  Be very careful if it was more technical. Very technical. It's, some folks can go from it, from, from a, from it like a business process sale. They can go from selling a gong or a sales offer and outreach, and they can go sell a complicated API to VPs of engineering or VPs of product, but most can't. Okay. So more technical is a tough, is a tough heuristic. More competitive is a positive. What really works, Lenny, is if you hire someone that from the number four in a space and they did well.

• 57:36Speaker 00

  You take someone that's number four in the space and then you're number two in the space. You think number two is really hard because number one's crushing you, but they're at number four in a space where no one can tell the difference between these products. That's a great one, right? So more, more a space that was more competitive, a space that is, is a positive, more technical. The other one related to technical on the pure B to B side is much more complicated business process. Okay, I see folks fail in B to B when they've sold us. Yeah, it's hard, but they've sold a simple, a simple business process. They go to something that's got a lot of integrations, a lot of complexity and a lot of business process change and, and they just melt because it's too complicated. They just, they just melt, right?

• 58:19Speaker 00

  Like there's a company I invested in, it's, it's doing over 20 million today and for some reason to simplify what they do, which is pretty complicated, they called it the gong for X. Okay, the gong for X and it's great for V to get a VC meeting and a few of the, but it's not even on their homepage. Okay, it doesn't really make sense. And the CEO had me listen to this, to this senior sales executive hired and the only thing he could tell the prospect was that they were gong for X.

• 58:44Speaker 00

  And the prospect had asked, well, how does this deep integration with, with this business process flow and Zendesk works and how does this go over to the sales force is like, well, we're gong for X. That, that $600,000 deal was lost.

• 59:00Speaker 00

  Right, but maybe that works in some space, right? I mean, and gong's hard to sell today too, don't get me wrong, but, but you see my point. It's just that, that simplicity, it's too, it's too complicated, right? And I know it's not the perfect heuristic, other than this technical thing, but the technical one, man, trust me, right? The, the too many B to B type reps melt in B to D. They just, they just melt. They just, selling to VP of engineering is a different, it's the same beast, but they don't suffer fools, do they? Not the VP of engineering, I'm close, they don't suffer fools.

• 59:31Lenny Rachitsky?

  I haven't heard this term B to D before, business to, to developers. I imagine that's what it stands for. Oh, interesting. I haven't heard that term before. Okay, let me zoom out a bit and I want to move on to a different topic, but before we do that, so we've talked about kind of these early days of hiring your first two reps, getting your VP of sales to help scale out the team. To give people a sense of where this goes as the business scales, what does the org evolution look like? You have these two reps doing sales on their own, then you have a manager. What does it look like over the next couple of phases of the sales org?

• 1:00:03Speaker 00

  Look, to simplify, there's rules of eight. So in sales, I'm actually not sure what the typical heuristic is in product because product teams are leaner. At least I hope I like it when they're leaner. But in sale, the thing about sales is there's no, there's no efficiency. Like if you have a sales led motion, half your company is going to be in sales at 10 million air. Half your company is going to be in sales at 50, half your company is going to be in sales at 100. It's, it's one of the tough parts of the software model is that there's no, there's actually almost anti efficiencies in sales. The, the, the public companies are actually less, they have the higher CACs than startups, believe it or not. Because they have so much market penetration. But so you're going to need a lot of people and it's rules of eight.

• 1:00:43Speaker 00

  Eight SDRs outbound reps need one manager, eight AEs, eight sales execs need a director above them. And then when you really scale, you know, eight, eight directors, you aren't really ever going to have eight directors, but eight directors could have a VP or eight reports. And so there's rules of eight. If you want to build an organization on it, it's all rules of eight. For a while for SDRs, thinking this was this high velocity entry level position, people pushed it to 12. But I, but the more folks I talked to today, um, the more I hear everyone's reverted to eight. Like I'd rather have fewer SDRs having better conversations. And so it's just, you can build your whole org with eights.

• 1:01:21Lenny Rachitsky?

  That is way too easy of an answer. So the idea there is you hire this VP of sales, then you hire six more, eight, uh, sales reps, AEs. So what happens next? You hire another manager. Got it. And then you scale eight more reps.

• 1:01:35Speaker 00

  And once you have eight AEs scaled, um, you know, you, you, you almost always are going to start, a VP is going to already, a good VP is always already me hunting two directors, two directors, whether they're just split up normally, whether they're east, west is a classic way. Another way dependent, like you might have smaller and larger customers. That's pretty standard, right? Commercial and enterprise. But a good VP of sales, once you have, once she or he has eight reports, will be bringing in two, two directors. Or maybe two VPs if they're an SVP, maybe there's a lot of title inflation today, which doesn't bother me nearly as much as a lot of other things we've chatted about. I don't care what your title is, if you'll actually do sales or do work. But, but yeah, well, you need to bring in managers at eight and folks that can also.

• 1:02:16Speaker 00

  A, a related point is a lot of founders worry, when will my, I really love my, my head of sales, but she's a stretch. Like most of them should be stretches. If you hire the seasoned one, they're not going to work. So for 95 out of 100 of us, our first head of sales should be a stretch VP of Sales. And what that means is usually they were a director before that, or a senior director, or sort of a VP. Okay. But you should be cautious about hiring your first VP of Sales for their first, third VP of Sales gig. They're not willing to do the job anymore. You need a stretch and it's, it's worth it for their career growth. It's worth it for their personal growth. It's worth it for the equity, right? So you're going to hire a stretch. That's a, that's an important tip right there, but then you're going to be a little worried. How, how, how far can Lenny go? How far could, because you know, I love Lenny, but he was a director for two years before this.

• 1:03:01Speaker 00

  And this is his first role and he did so good last year, but I'm worried Lenny's going to break. Right? I'm worried Lenny's going to break. And related to this quick, the, the simple answer is Lenny will break if, if he can't source those directors under him. You can scale forever as a sales leader if you can hire better managers under you. And it's true of any functional area, but what you'll see in sales is you'll see your stretch VP of Sales drown when they never can hire better managers under them. Right? They'll end up doing some weird internal promotions, which you want. You want to do internal promotions. My rule is you want to promote 50% from within and, and, and hire 50% without for your managers.

• 1:03:42Speaker 00

  But if you're, if you're really the only people you can promote are just junior people on your team, you can't find leaders, you can't, you can't scale, right? And so I do see this happen too frequently is a first time head of sales does it. And then they're like, here are my managers, Lorraine and Jason, but they really were just reps for two years and they don't know how to do it. So you have a whole bunch of people who don't know how to do it. That's when the organization cracks.

• 1:04:06Lenny Rachitsky?

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• 1:04:50Lenny Rachitsky?

  and over 10 million C-level executives. You'll be able to drive results with targeting and measurement tools built specifically for B2B. In tech, LinkedIn generated a 2 to 5x higher return on ad spend than any other social media platforms. Audiences on LinkedIn have two times the buying power of the average web audience, and you'll work with a partner who respects the B2B world you operate in. Make B2B marketing everything it can be and get $100 credit on your next campaign. Just go to LinkedIn.com/podlenny to claim your credit. That's LinkedIn.com/podlenny. Terms and conditions apply. There's these terms that we throw around, account executive reps. It might be helpful just to give people a sense of like, what does this actually mean when someone's an account executive?

• 1:05:34Lenny Rachitsky?

  Is that they're just sitting there calling and doing sales directly? Whatever the key terms are for like the roles or the title, it might be helpful to quickly summarize.

• 1:05:41Speaker 00

  Yeah, I think the two ones that are probably less obvious for folks that are new are SDR, Sales Development Representative, and AE Account Executive. And SDR is generally, although I wish it wasn't, it is generally an entry-level position, often fresh out of school, generally paid on the order of 60 to 80K OT in SaaS, in US-based SaaS. And their job is to email for dollars, dial for dollars, and in many cases to screen, to screen inbound leads. It's entry-level, and their job is to pass on a lead to a sales executive, an account executive, an AE. And so not all companies have SDRs.

• 1:06:19Speaker 00

  It's a longer topic, but pretty much all the best teams have some type of SDR function now. So that because we've learned, we want to specialize. We want openers opening and we want closers closing. And so that's the rough idea of SDRs are openers in some cases. And account executives are the more seasoned folks closing. And you know, it varies. A compensation from account executives that are US based could be anywhere from like 90K to 200K, depending on that's with base and bonus split at 50 50, depending on whether they're hunting tiny deals or big ones. That's the way an account executive works. And I think what doesn't happen today, which may, so those are the acronyms, SDR and AE. I think you can figure, people can figure out VP of Sales. That's Vice President of Sales.

• 1:07:03Speaker 00

  I think a thing that's gone on in the industry that founders expect now, because there's so much discussion of it on LinkedIn and social media, but I haven't found it worked is that an account executive will magically be full stack. They will do outbound themselves. They will develop, they'll go use ZoomInfo and Apollo and develop a list themselves. They will manage that outbound list themselves. If they're, if they don't have enough inbound or enough in their free time, you know, if they'll do any in their free time, they'll just do more outbound. It doesn't, you know what sales reps do in their free time today? They sell real estate or courses. Okay. There is no, if you want a tip for founders, I know you want this full stack AE. And, and they do exist when they're micromanaged in certain high performance sales organizations, but they don't exist in, in real life, right? They're specialized.

• 1:07:47Speaker 00

  So most AEs, they want to be closers. They want to be handed a lead, a contact me a lead. They want to work the lead and close the lead and, and you hire some SDRs to help generate more demand. And so those are the, those are the, those are the basic acronyms. What, what's hard for most founders, most, here's the tough part. Most founders have enough stamina to manage a couple of these AEs, these account executives, these folks to work the leads. Most founders do not have the stamina to manage 10 kids fresh out of college that need to be micromanaged on an hourly basis to call leads. So very, very few founders themselves can manage a team of SDRs. But if you can, it's like a superpower.

• 1:08:28Lenny Rachitsky?

  That was really helpful. I did not know what exactly these terms represented. And when you're hiring those first two reps, they should be the account executive level.

• 1:08:36Speaker 00

  Yes. Yeah. And they'll do some outbound and they'll do some of this SDR work. It's just ultimately people end up specializing.

• 1:08:42Lenny Rachitsky?

  What is the title for someone above the account executive as a director of sales?

• 1:08:46Speaker 00

  Yeah, there's really no, you know, it's a meta topic. I wish there were another career path for these ICs. Okay. This does exist in product. It does exist in engineering. Okay. It should exist in sales, but the truth is it doesn't. There is no senior SDR. And for this outbound and for this AE, this person closing, yes, you can go more enterprise and make more money. But there isn't really a senior AE track, but there should be. It's unfortunate. It should be. Too many of these folks are looking for, they look to go into management for promotion when what they really should look for is to be a super IC. And it's a shame that more folks don't try to implement a super IC role in sales. But that's basically it. The career path is in management, right?

• 1:09:30Speaker 00

  And that's why another tip, another mistake that founders often make is they hire the number one account executive at a hot company to be their head of sales. It's not the same skills. Most sales executives should not be managers. They don't want to be managers. They want to be individual. They want to be highly paid individual contributors these days that mostly work from home and make a lot of money working 30 hours a week.

• 1:09:56Speaker 00

  That's not, does not lead, that does not naturally breed great management skills.

• 1:10:02Lenny Rachitsky?

  I want to shift directions a little bit and talk about product and sales. A lot of listeners of this podcast are product managers or founders building products. How involved should product managers be in sales? And vice versa, how involved should sales be in the roadmap and what's being built?

• 1:10:19Speaker 00

  I think in the best run B2B organizations that I've worked with in my own as well, the great, at least the head of product, the VP of products are deeply involved in sales. Deeply involved in sales. Deeply involved in sales. A company I invested in that's just crossing 60 million, they just had a meeting with who will be their largest customer. Okay. And the head of product was there, is at the board meeting is like, thank God I was there because what they want to do with our product, we sorted it.

• 1:10:54Speaker 00

  We sorted. No, the product does do it. But what they want to basically do is deconstruct the product. Okay, they don't actually want to use the backend and analytics and some other pieces, but they don't really need the front end of the product. If the head of product hadn't been there, that deal would have been lost. Would have been lost. An AE doesn't know that. Even if an AE did know that, a sales rep did know that. Even if the VP of Sales didn't know, a VP of Sales would not be empowered enough to stand up in a meeting and say, I know what you want. We can launch tomorrow on this and in 90 days, we'll tweak the UI so it does exactly what you want. You want that in your big deals. If you have that magical VP of product that truly owns the roadmap, owns it and has the gravitas for that meeting, they become like the mini CEO in these meetings.

• 1:11:39Speaker 00

  A lot of CEOs at scale, I've talked to, I was just talking with Daniel Chet at Greenhouse, he does this, they're over 200 million. When they have that head of product, they divide and conquer with the big customers. And the CEO can do some, right? And the VP of product can do others. Sometimes the VP of Endure, if they're very producty, can also do that role too. Like sometimes you get this three, these three weapons. In the old days, sometimes your VP of customer success could do this. But unfortunately, and I know this is going to trigger some people. I don't see customer success stepping up for this pseudo-product role anymore. And I see them shrinking more and more into process. But that magical VP product, they give you that scale, that CEO level scale. Can a product manager or a director do that? In my experience, the best ones, absolutely.

• 1:12:24Speaker 00

  The mid-pack ones that are working on the color of the pixel.

• 1:12:30Speaker 00

  I'd rather not have them in the deal. You have to be empowered, you have to be utterly fluent in the product, the entire product. Right? You have to be the one that knows how to connect the pieces that don't ought to always connect themselves, right? And you have to have the gravitas to work with a large customer, to make commitments, right? And so that deep knowledge and commitment, like it's hard below the VP level, but if it does exist, I love it. They become, they become one of the greatest strategic weapons of a B2B company is bringing the product team. Because the VP of Sales never quite goes that deep and can't make the commits, right? And the CEO can't be everywhere.

• 1:13:04Lenny Rachitsky?

  The bane of many product managers' existence is the flip side of sales' involvement in product. Do you have any advice for how you've seen the best SaaS companies handle requests from sales going into product? How product teams should think about requests from sales and making that work?

• 1:13:20Speaker 00

  I think this one is so simple and I'm surprised people make it so complicated. Okay, I know we all release 28 times a day, okay? But the reality is, software still goes on quarterly release cycles, no matter what we say, okay? Business, your customers cannot process 88 releases a day, okay? The maximum a customer can process is two big releases a year and maybe quarterly, right? So let's simplify, because that's how customers think. Forget about how we build software. Every quarter, give your head of sales a certain budget, whether it's story points or 10% of the pie chart. However you do it, give them a budget. And when you do this, things will radically change then. They radically change because even the best VPs of sales, they change like the wind, okay?

• 1:14:04Speaker 00

  On Monday, what they really need is the HubSpot integration. And like, oh my God, like, you know, we weren't going to do that for two years, but I guess we could change everything on Monday. But then on Wednesday, a new prospect comes in and, you know, we need SAP. Like, but we just spent two days specing out, you need SAP. And then on Monday, it's Salesforce, right? And it's not that sales isn't honest, it's just the big deals, the big ones, always the tail's wagging the dog. And it burns out the organization, okay? Even with the best sales leaders, I find it burns out, especially because the stressful deals, like they overreact. And they're not, as good as they are, they're not product people. So they don't really know how to prioritize and force rank. If you say, okay, Lenny, my VP of Sales, great, HubSpot, SAP, whatever you want. You've got 10% of the budget, you've got 100 story points, whatever metric or heuristic you use.

• 1:14:49Speaker 00

  But you've got to decide now each quarter.

• 1:14:52Speaker 00

  And if you want, if you want to change during the course of the quarter, if you want to disrupt our whole engineering and product team, you can do it, but I understand there's a high cost. And the later you do in the quarter, the less successful it's going to be, because we already started the HubSpot integration. Like, not only will it demoralize the team, but we're going to run out of, you already used your budget. So when each, if you, as a product, I just don't see enough product leaders being objective here, saying, listen, here's your budget. You get it, period. No one can take it from you. No, you know, I guess the CEO can steal it if she really wants to, but it's yours, VP of Sales. And it will, they, they will, they will do the load balancing across their team. They will do it. They will listen and they'll say, Maybe I don't need that HubSpot integration after all. Maybe, right? Because what a VP of sales should be doing is taking like a VP of sales,

• 1:15:36Speaker 00

  you can't, the product has to look like the CO has to look five years into the future. Product has to look about two years into the future. And you really can't ask a VP of sales to look more than 12 months into the future because that's, that's where they're next on the line. But a good one will load balanced feature requests across the year. And they will listen to all that because they'll actually be in sales. They'll actually be in deals and they'll be listening. They'll realize, look, even though we're going to lose this deal to HubSpot, I've gotten four SAP requests last, I'm, I'll, I'm going to take that bet. Even if I'm wrong, I'm going to take that bet. You've got to give them that and you've got to talk about it every week and say, look, here's your budget, Jane, here's your story points, your whatever, your 10%. This is what we're currently, this is what we're building now for you objectively. And this is what we're currently planning for the next two quarters. Would you like to change the ones for the next two quarters?

• 1:16:20Speaker 00

  Because we haven't committed any code yet. And if you really want to change what's in process, you can't. Otherwise it's going to be hyper disruptive, right? But you've got to at least pretend to be objective for sales. If you're too emotional about it, you break the organization. You've got to say, listen, I know we've already written 80% of this upside integration. If you really need us to put us on the shelf and drop everything for a million dollar deal, well, that we're a startup, we'll do it. But understand just, is this really, really what you want? And if you involve them every week as a stakeholder, it, it magic happens. What I see, I just don't see this hap, I don't see the VP as a product that I work with. I don't, maybe I'm not, I know in all the staff meetings, but the meetings I'm in and the board meetings, I don't, I don't see this, this back and forth happening.

• 1:16:58Lenny Rachitsky?

  This might be the same exact answer you just gave, but say you're a PM and a salesperson comes to you, hey, we're about to close this deal. We just need this one feature. Can we just get this on the roadmap? What's the best way to help that salesperson understand why it's not happening? Help them feel like, okay, I get it. Is it exactly what you just said? Like, okay, we could change everything. Here's the story points you have this quarter.

• 1:17:17Speaker 00

  Well, are you assuming, are you assuming that PM is the head of product or empowered enough to make the decisions?

• 1:17:24Lenny Rachitsky?

  I'd say, yeah, that PM could put something on the roadmap if they think it's important.

• 1:17:28Speaker 00

  The, the reason I'm a little confused, just because I want to get it right is I'm hearing, what I'm hearing, which maybe isn't what, what you said, what I'm hearing is a, a junior, a junior IC rep is talking to kind of a more mid-level product person about the roadmap. That's a bro, and, and that's, you want to have that, that's like one of the reasons we actually go to the office. Cause those discussions don't happen on Zoom, Lenny, they don't happen. And you want those discussions to happen, but you don't actually want them empowered. You want them to say, listen, I will talk to my boss. That's the right answer. It's too confusing. This, this stress between product and sales is a good thing. It's a, it's a sign of a well-run B2B company when there is stress between product and sales. It's a good sign. It is a good, if there's no stress, you're not, you're not in enough deals.

• 1:18:13Speaker 00

  You're not in enough deals if there's no stress. But the stress has to have enough process, even in a startup, that it doesn't break. Cause as your question, Luce, the fact they can break organizations again and again, right? People get, people resent it on either side, right? And so you, this is one thing where the answer has to be, look, we, we can chat about it over lunch. We can chat about this and, and, and, and actually you've got a good idea, you, your individual contributor. I'm going to tell my boss on Monday that I think we should do, I'm going to, I'm going to use a little social capital, say we should do this, but you've got to push the decisions up. That's as far as I'm going to make recommend. Otherwise, in, instead of that one, one stressful conversation at the VP level, you've got a hundred, you've got 10 times, 10 times a hundred. And again, they're fun lunch conversations, but they're, they wreck you.

• 1:18:53Lenny Rachitsky?

  So the advice there is basically talk to your manager, I'll talk to my manager. They need to hash this out. It's not my call.

• 1:19:00Speaker 00

  I think you've got to push it up and I think you've got to force the VP of Sales and the VP of Product to have this weekly meeting about the budget. And that will force them to have enough, just enough organization on their team so that it can all be surfaced up. Cause that means they each have to have a meeting with their team for 30 minutes each week and say, I'm going to put it up on the whiteboard, guys, to my sales team. I'm going to put it up on the white, like the sales team's going to say, look. And I've been to many of these meetings where you force the sales team to force rank what they want. And you, you end up, I can tell you, Lenny, a hundred percent of the time in the sales meeting, when you force, do a whiteboard force rank, you end up walking out with very different outputs than when you start the meeting in sales, a hundred percent of the time. On the product side, you need to do the converse, you need to say, we owe sales 10% of our points. So we're going to put in a weekly, in our team meeting, we're going to put in 15 minutes of our team meeting.

• 1:19:45Speaker 00

  And we're going to make sure we have the priorities right from the sales team. Let's go over what I got from Linda. This is what she says. Is she wrong? Should we do something? How can we help the sales team be even more successful? And what inputs is the team hearing? And they can raise their hand and they say, look, I just had this hallway conversation with Bobby. But honestly, Lenny, I can build a sub spot integration in a day. What? I thought it, I thought it was really hard. No, I did it at my last company. And listen, actually, we can actually outsource it to Bob and Linda at this agency. I know for 20 grand, they'll build it next week. I'm like, that's a magical moment, right? That's a magical moment, but you've got to each have these parallel meetings or it's just, it's just, it's just that the good thing that tension can become a, can become debilitating, right? You, when you've, we've all seen those fights, those almost fights that break out and they come from the, a place of passion. Right? But you've got to have structure.

• 1:20:30Lenny Rachitsky?

  Great advice. Another trend I've been noticing is that product teams are taking on P and L responsibilities and revenue goals. What's your sense of, is that good? Is that bad? How do you think about that for product teams?

• 1:20:42Speaker 00

  You want everyone to be aligned on the big picture with, for revenue goal for the end of the year. Is the question, you mean having financial bonuses and stuff tied to hitting the plan?

• 1:20:51Lenny Rachitsky?

  More that their KPIs and their OKRs are essentially like this much revenue. You need to drive this much revenue from your experiments, from your product launches.

• 1:20:59Speaker 00

  As you can see, I have a lot of opinions on, on things here that are dated or in their life experience. This one, I don't, I need another year in the oven and I'll tell you why. I'll tell you why. What happened the last 18 months is in customer success, which is a, which is, you know, in the old days, it was related to product. Now it's, it's less so, which is, I think is unfortunate. In customers in the last 18 months, this happened all across the industry. 24 months ago, customer success's goal was happy customers. Measured in retention, sometimes NRR, like net retention with upsells, sometimes with GRR, like just logos, how many logos? Say that was your only job, happy customers, happy customers. Then things got harder in many areas of B two B and every customer success team last year, their goal was revenue.

• 1:21:41Speaker 00

  You need to bring in more revenue from existing base and it destroyed customer relationships. It had, there is a leading public company, I will not name them. I'm a positive guy. I will tell you a company we all have used for years and loved. Okay. And they did this to their customer success team. And they came to us last year, we paid $299 a month for this product for our team. They asked us for $50,000 upfront or said they would turn it off that day.

• 1:22:06Speaker 00

  That week, maybe it was that week, $50,000. That's what happens when you weaponize. And so customer success, I know this is going to trigger some people, but it is true. When I talk to leaders, customer success got weaponized and I don't like it. Okay. I don't like it as a product, as if all founders are product people, I think. I don't like it as a product because I think it's bad for customers. That experience I got was horrific, wasn't it? That 50,000 being told and it got walked back. And the fact that it got walked back is almost even worse because it wasn't true. Right. It was a threat, right? And so do I want to weaponize the product team? I want the product team aligned with revenue. This is, these are the tough decisions for founders, right? But, but I think we're going to regret to some extent weaponizing teams that we don't need to weaponize.

• 1:22:49Speaker 00

  Having said that, I will tell you, and again, no knock on Adobe, but when I was a VP at Adobe, and it was a long time ago, when product was in another building in some cases, that was not great. Okay. And I love Scott and the whole team. Like it was a great experience, but I can just tell you what I learned is that did not work for me as an agile guy. Like having groups that would like do this work in isolation. And, and the problem was they would never talk to a customer. Right? So I know I want product constantly talking to the customer. I know I want the VP of product with a lot of equity, wanting to hit the bookings number for the year. Do I want your average PM weaponized and forced to bring in revenue from an experimental feature? When everyone agreed it's the, the test we're going to run. Like we only can run so many, like you say, should we, should, should they have revenue for like new feature launches,

• 1:23:34Speaker 00

  for new product expansions, for new things? Yes, but everyone's got to make that decision. There aren't that many of us that have a thousand extra engineers sitting around with nothing to do. These are very, even the smallest experiment, no matter what it says on the internet, again, that we release a hundred times a day, I would argue bringing any product extension to market is very expensive and risky because, because you're taking away from something else, right? These are expensive decisions and I, if you punish people from the, for the mistakes in product, right? This is something that big companies are actually better at than startups. Which is they don't fire you if the new initiative fails, right? Because then no one at a big company would ever join the new initiative, right? There are exceptions, but no one at Adobe or Google would work on the new product if you got fired if it didn't hit 100 million its first year.

• 1:24:20Speaker 00

  So one thing I saw that was very, and I don't know how to bring the startups at my big company experience was it's liberating to some extent to let people fail up to a point, right? It's liberating because the cost of failure in a startup is so high, isn't it? It's just, it's just so high. So I know that's not what the exact question I, and I asked me in a year, but I, but my advice is just be careful that you don't weaponize functions.

• 1:24:44Lenny Rachitsky?

  I probably should have clarified. I think this is mostly true in PLG companies where most of the growth is coming from product. But I imagine the advice is still the same is like, be careful putting too much pressure on the product team to focus on.

• 1:24:55Speaker 00

  Well, that's how you get dark stuff. I mean, back in the day, I remember my sister worked at Vistaprint for online business cards and her entire job was to buy, was to force people to buy upsell of additional products on the checkout page. They didn't want to buy. That was her whole job and she was paid a large variable comp to get people to buy third party products without realizing in their checkout. And it worked like that's all she did for three years was figure out dark stuff, I mean darkish grayish stuff. So that when I bought my, my business card, I also bought GoDaddy and 11 things that I didn't, didn't want. It works, but uh, you know, they, they, it doesn't create a high NPS, does it? The thing is, here's the thing that you have to think about.

• 1:25:38Speaker 00

  You know what's crazy landing now and then talk to a lot of folks is there's so many SaaS companies at a billion or more in revenue. I just wrote up, you know, there's just a proof or which is SaaS for construction. I just wrote up, it just crossed a billion in revenue, right? So many folks are at a billion, cloud players crossed a billion. And the only way you can do that is if your revenue compounds. Your revenue and I just, in fact, I just myself, I just interviewed Matt Mullenweg from WordPress 20 years. He's been doing this and he said, the number one thing he didn't understand at WordPress, at Automattic, was the power of compounding. So when you do these things that are customer hostile and we're, a lot of us were under stress this last 12 days, hit the numbers, right? This is your job as founders, you've got to load balance the fact that the cat, the cash has to last and my investors are mad with me,

• 1:26:22Speaker 00

  but nothing matters in B2B that it compounds. And some of this dark stuff you talk about on PLG, it anti-compounds. Right? And I would say, and I would, let me flip it around. So the magical thing at a high level that it compounds, if you have a self-serve-ish model, a PLG model, I actually think the number one most important metric is churn. Going to this churn, churn, churn, churn. And when I meet any startup like for investing or anything, if the churn is not top decile for, for a low end product, I'm always out. I, it's almost unsolvable. It's almost unsolvable. This three to 4% a month churn rate that a lot of SMB stuff, it's, it's almost unsolvable. So, you know, I, I think that's where the energy should go is relentlessly bringing down churn.

• 1:27:06Speaker 00

  So that you, 20 years from now, we all have billion dollar air our companies. That's what we want.

• 1:27:11Lenny Rachitsky?

  I have kind of a rapid fire set of questions before actually the lightning round. So we'll see if we have time for all these things. So I'm just gonna have a bunch of random questions. I'm gonna fire Ian, see what comes up. Sound good? Okay, cool. Got the thumbs up. Okay. What is just one thing a founder or product leader can do to become better at sales?

• 1:27:27Speaker 00

  The number one thing they can do, and this is very tactical, at the end of each meeting, because again, both of them are good middlers. The head of product and the founders are good demos. They're good at talking shop. They're good at talking the industry. They're good at talking workflows. Learn, this is the only school you have to learn. Even if you're not comfortable asking for money, learn to ask for what's the next step, Lenny? This is what all great salespeople have learned to do. Actually mediocre salespeople are terrible at this. The best salespeople never leave a meeting without a next step. The next step does not have to be a check. Okay. If that's, don't, don't break the relationship. But what's the next meeting? The next meeting might be, Lenny, is there someone else at your company that I could do a demo for? People are lazy. They don't want to do multiple demos. But in 2024, we all have to demo more. Multiple stakeholders in 2021, it was one stakeholder. Now it's a four stakeholder sale.

• 1:28:12Speaker 00

  So if you don't know what to ask at the end of the call, ask who else can I have? Who else? Lenny, is there someone else? I know you're excited to buy our product, but who else? Is there someone else in the organization? I can, can I help you? Can I just do a demo? A demo is not threatening, right? Whatever the next step is, right? Can we do, can we get, what's the next step we can get on our books? Right? And listen. And the best salespeople march deals step by step by step by step. And then they put in the time. They've done the demos, they've done the pilot if they need to. They've helped them get going. They've helped them see the value. And then that, if it takes six steps to say, okay, Lenny, now we've got five folks at the organization using it. It seems here's the deal that they love it, right? What can we do, Lenny, to get going? Can we get, can we get a contract signed so we can get going on February 1st? It's just very natural. And founders just end the zoom.

• 1:29:00Speaker 00

  They just end the zoom and they wait, they wait in their inbox for the next step to come. But it doesn't, it rarely comes on its own. That's the number one tip is make sure yourself and you log it in your CRM, that you always have a next step after. You don't have to be great at sales. As long as you're moving the ball down the field and get it into the red zone. And then figure out how to ask for the money. But you don't have to ask for the money until it's in the red zone.

• 1:29:21Lenny Rachitsky?

  Amazing. While, while we're on this topic, is there like a book or a course or anything that you just recommend? Folks go to get better at sales? Just like, is there some tactical, go read this thing? It'll help you. Or is it just it's hard? You're not going to figure it out reading a book.

• 1:29:35Speaker 00

  I am a voracious reader. If I only wanted to plug myself, right? And I usually wouldn't. Two things that we have, we have something called SaaStr University, saster.university. It's free. There's a pretty good course on getting, learning about sales. It's not perfect, but it's pretty good. It just organizes a lot of the stuff we're talking about and it's free. So I think it's pretty helpful. We actually wrote a book called From Impossible to Inevitable that sold about 100,000 copies.

• 1:29:58Lenny Rachitsky?

  Oh, wow.

• 1:29:59Speaker 00

  I did almost none of the work, although it's a lot of it's my content. Aaron Ross did it. It's actually really good and it interviews a lot of top sales leaders and goes through a lot of stuff we did. So I don't usually hype it, but for 15 bucks, I think this, and actually I've never made one dollar. I've never even got a check for these 100,000 copies. But I do think it's actually, the second edition's pretty good. So I think if you like what we're talking about, the SaaStr University and the others. I would say the, I would be very caught, I just hyped my own course, which is free. Like, I don't think I'm shelling something if it's free. The book I don't make a dollar on. I'd be very cautious and this is tough. Maybe there's something we can work on together because there's so many courses and so many people selling stuff the last two years. Just be cautious. Just be cautious. The last thing I will say is there is another

• 1:30:41Speaker 00

  community called Pavilion and I do think it's great Pavilion. It does have a lot of networking and stuff for sales and connecting sales with founders. And I am a super fan of what they're doing. That one's worth investing in, but be careful about Bob and John's sales courses on the internet. There's just too, there's too many.

• 1:30:59Lenny Rachitsky?

  Awesome. All right. We'll link to all those things in the show notes. Next question, what is the ideal trial length for a free trial for a sales team? Is it like 14 days a month, years? What do you recommend?

• 1:31:11Speaker 00

  Tomas Tungus did a whole SaaStr presentation just on free trials and free trial lengths. It was really good, but it was the one thing you didn't know, which I know just being an old timer is the reason, one of the reasons we have 14 day trials on the internet is in the old days, the Salesforce sales team, when they were SMB focused, wanted to close deals that month. So they forced Salesforce to move from 30 to 40 days. There was no evidence it was better for the customer. There was no evidence that it got usage going or people, they just wanted to close deals the same month. And so my, my real, so that's something to be cautious about these metrics and be cautious that they're, since we're talking to product folks, be cautious that they're customer centric. You know, the, you know, that's a Salesforce and Salesforce is very enterprise now, but in the old days it pushed it to 14 days. So the sales reps could make, close deals faster.

• 1:31:57Speaker 00

  What we learned from Slack in Zoom until recently was infinite trials work pretty good. So does Canva. Slack and Canva and until recently Zoom were okay, waiting four years to convert. And those are epic companies. Those are epic companies. And these are one of the things that only founders can make these decisions. I wrote this post years ago saying, who's your VP of free?

• 1:32:19Speaker 00

  Because who's got a VP of free? Do you know anybody that has a VP of free? I got a VP of growth. I got a VP of product. But who? If you have this massive free base, who's your VP of free? I know almost no one that has a VP of free, right? And usually it's some kind of collaboration between product and the CEO, right? They're the VP of free. But even then, you need a VP of free. We don't have one. And so just think, I don't, there's no perfect answers. But in a world where we're tightening nooses everywhere on trials, we're tightening nooses everywhere. Be careful the advice you get. Be careful the short-term advice. For example, another related terrible piece of advice VCs give you is switch to annual contracts. This is terrible advice. Terrible advice, Lenny. Terrible advice from people who have never built products and aren't in the field. Going to annual contracts on a spreadsheet looks great. On a spreadsheet, it looks great.

• 1:33:04Speaker 00

  You know what's better? Letting customers pay they want to pay. If it's you or me buying for ourselves, Lenny, you know? We're still going to put it on a credit card, aren't we? If it's our own personal, and we want to pay monthly usually. We don't know, even if it's a, we usually want to just try it monthly. Big companies want to pay annually because they have procurement departments. Why force people to go the way they don't want to go? So just start, this is, this is a product audience. Product needs to be the voice of the customer. It's not so much customer success as it used to be. It's not so much sales. You've got to be the voice of the customer together with the founders and push these things. Think about, I would do the longest possible trial that is still customer-centric. And understand there's tension. Understand there's tension, right?

• 1:33:47Speaker 00

  I say, anytime I'm in a board meeting where someone wants, where some VC says, let's do annual for an SMB. I'm like, no. We're, show me the money, show me the evidence that this is better for the customer, right? How many times have you gone to buy it, something for yourself? And it's like 90 bucks a month? And that's annoying because it's an untapped credit card charge. But do you want to pay 240 upfront? I mean, maybe you do it for Riverside or something you use all the time, but some random product you just discovered? You're just going to bounce. Yeah. So who's going to show the data and the balance, right? A related point for like in sales, no one does enough. Everyone does these win-loss meetings, but no one talks enough about the deals they lost. Everyone talks about the deals they won. All the lore, the tribal lore in sales is how we won the deal.

• 1:34:30Speaker 00

  People should be spending more time talking about deals they lost than deals they won. Right? And same thing for this PLG motion is if you make your, yes, I know what I'm, I give everyone a pass for 2023. Everyone whose growth plummeted and did things they shouldn't. Did price increases they didn't earn, cut the free trials, hid their free additions. I'm going to give you. Look, you've got to give your team a little stress relief, right? So I'm giving every, every person I work with, every portfolio, everyone a one year pass. But the past is in the past. We got to get back to being customer centric and building. Businesses that have, that build to a one billion ARR on their own because they're wonderful businesses that are product centric, right?

• 1:35:13Speaker 00

  That, that recur and every time you rip a customer off, you, you lose, you lose that relationship's damaged, isn't it?

• 1:35:23Speaker 00

  And, and you know, a controversial thing I say to the product team, but I think this is the right thing. If you're going long is like everyone raised prices last year, as you know, right? Everyone raised prices. The question I ask folks is, did you earn it? What feature did you show? Did, if you raised prices 8% last year, did you add 30% more value to your product? You know, in the old days, pre, pre this, this crazy years, your answer usually was yes, people would wait up, they would wait a couple of years, right? And that the, the whatever product from four years ago was so much better, it really was, really had earned 1995 instead of. Last year, no one earned their price increases. No one came out with an amazing new addition, an amazing new functionality that earned it. They just sent you an email saying, you know, you're paying more.

• 1:36:08Speaker 00

  So we get one pass, but earn it, earn your price increase, have the longest free trial possible, own it in. And this VP of free thing, like it's got to be founders working with product because no one else cares about the free. You can't expect the sales team to care about free, can you? You can't expect the marketing team to care about free, not unless they can immediately monetize them, right? Unless they can ram them into conversion. People, uh, ignore, abuse their long tail in, in the last 18 months, but your long tail is your, is it, it, these, these are your, even if they don't convert that much, they're your advocates.

• 1:36:39Speaker 00

  I mean, how many people read your newsletter? 500,000 people, right?

• 1:36:42Lenny Rachitsky?

  Almost 600,000.

• 1:36:43Speaker 00

  Okay, 600,000. Now, not all of them convert, do they?

• 1:36:46Lenny Rachitsky?

  No, no. That's exactly how I look at it. It's kind of the

• 1:36:48Speaker 00

  Okay.

• 1:36:48Lenny Rachitsky?

  Brian Balfour is

• 1:36:49Speaker 00

  What about the 590,000 of them that love Lenny that don't convert, right? If you over monetize them, then your whole, then Lenny's empire, Lenny's community doesn't exist if you over monetize them. But who, but when you bring in a VP of Sales for Lenny and a VP of Growth and a VP, like, you can't expect them to care as much about that long tail as you, right?

• 1:37:10Lenny Rachitsky?

  I love your passion around this. So what I'm hearing partly is you're a big fan of freemium, essentially, right? And the benefits of product-like growth where there's something you could just use indefinitely. Or do you still think it's a trial where there needs to end at some point? Or is it just like, no, freemium is great in a lot of cases?

• 1:37:26Speaker 00

  Listen, I'm a big fan of long tails when they work. They don't always work for enterprise products. I'm a big fan of delivering more value than you take out for your customers. And I am a big fan overall of free because, and I know you'll agree with me this, every founder figures this out at some point. Free products are better software.

• 1:37:48Speaker 00

  Products that cannot offer a free edition cut corners because they don't have to be good at onboarding.

• 1:37:56Speaker 00

  But products that do not have a free edition have human beings that bridge the gap between buying and deployment. And that's okay at ServiceNow and that's okay in certain products. But the products are, the best products invest the engineering cycles to have a free edition. Whether that's truly free, whether it's an extended free trial, whether it's a long tail or a medium tail, the amount of, all of your product is better if people can actually, if you have a free edition, all of your, all your customers benefit, even your enterprise customers benefit. They all benefit.

• 1:38:27Lenny Rachitsky?

  This idea of VP of Free, I think technically it's probably the head of growth for a PLG company or the person leading the self-serve part of the business.

• 1:38:36Speaker 00

  But even they, even in the organizations I work with that have those structures, that that person is focused on monetizing that tail. Who, who stands up for the 590,000 other readers of Lenny? Who's our champion?

• 1:38:49Lenny Rachitsky?

  Yeah, and you're 100% right. That's exactly how I think about the newsletter. There's this free audience and ideas. Over time, they get convinced this is worth my money and let's give it a shot.

• 1:38:58Speaker 00

  Yeah.

• 1:38:58Lenny Rachitsky?

  So, yeah.

• 1:38:59Speaker 00

  And your VP and your growth person, like, let's say 1% converts. I'm just making that up. Going from 1 to 1.1 actually is a big deal at that at that scale or 1.2, right? That that's okay, but but you've got to nurture the 490,000, not spend all the calories just ramming the paid edition through, right? This, but only it's the fun thing because once you hit a little bit of scale, this is part of your job as founders and product leaders is who's gonna be this VP of free? Like, it's not growth. I don't think it's the growth team or something. Their two, their their focus is they gotta hit their their goal, and their goal is to get another half million out of the newsletter this year. That's their and they're getting that's their bonuses side to it. You think they're gonna work on the free ones? No chance.

• 1:39:43Lenny Rachitsky?

  Makes sense. Oh, man, there's so many things I can go into and want to go into. I also want to let you go. So with that, is there anything else, Jason, that you wanted to share before we get to our very exciting lightning round? Anything you want to leave listeners with?

• 1:39:59Speaker 00

  I think just make this the year of the customer, guys, and I really think that sales has been under so much pressure the last 18 months. Customer success has changed. Product teams have to step step up. This is your time to do great things this year as product people. Be the voice of the customer, be the VP of free, be the whatever, be the champion, stick your neck out, work harder, folks. Work harder. The funnest part of anything in startups is working hard. But in product, it's extra fun. By working harder, you have the more fun conversations. Find the delight in the delight in product is making customers happy. It's not worth it otherwise. It's otherwise it's drudgery and it's it's endless PRDs and Gantt charts and mindless discussions.

• 1:40:41Speaker 00

  Make your customers happier this year. You will be happy. This is the year of product. And we all get a pass for whatever whatever bad deeds we did or mediocre deeds we did in 2023. Get back and be the vanguarding of companies. Startups need and bigger companies, they need someone to inject energy again in many cases. Energy has been lost. And it would be great if product can do it and say, listen, let's do something like, even if we're not exactly sure how to get more leads. Okay, even if we're not exactly sure what to do. There's one thing under our control is the code we write and the product we ship. Let's do some three great things this year. Let's just do them not good, great. Let's do three great. And what you will find is the whole company will respond, including sales, including marketing. Include if we start shipping great thing.

• 1:41:24Speaker 00

  Few things inspire teams more than when you're shipping great products. So B, if you weren't the leaders the last two years, if you were being forced to, to weaponize your customer base, somehow be the ship three great things this year. That's my challenge. Ship three great things.

• 1:41:39Lenny Rachitsky?

  I love this. This is the year of product. That might be the title of this podcast. Jason, we've reached our very exciting lightning round. I've got six questions for you. Are you ready?

• 1:41:49Speaker 00

  I'm worried about the first one, but go for it.

• 1:41:52Lenny Rachitsky?

  They're very non-surprising because they're always the same. Uh, what are two or three books you've recommended most to other people?

• 1:42:00Speaker 00

  Uh, that's the one I just want to take a pass. I know they're the same. I, I read, I, I read more than anybody else in the world, but I don't, I wish I had those two great, great books that have changed my mind the last 12 months, but I, I hopefully I've added some value. But this one, I think I gotta take a mulligan on.

• 1:42:13Lenny Rachitsky?

  Accepted, acceptable, acceptable answer. Uh, is there a favorite movie or TV show that you really enjoyed?

• 1:42:20Speaker 00

  Oh, The Terminal List, The Terminal List.

• 1:42:22Lenny Rachitsky?

  The Terminal List.

• 1:42:23Speaker 00

  The Terminal List, yeah. I'm not into the Chris Pratt. I'm not into that, that goofy soup goofy superhero movies he does. And I know people like it, but The Terminal List is pretty, it's, I got it. It's, it's a, it's written by this ex Navy SEAL that like, like I think tech people don't read the, everyone but outside of tech reads this author, but Amazon did this thing, The Terminal List. And I think it's, it's the reason it gripped me. It's, it's like this post, it's like a lot of tech is right now is like, we're trying to do the right things, but are we doing the right things? It's, it's just confusing. So this one, this one I couldn't, I couldn't put down The Terminal List. That was my favorite show. The other one, you know, the one I liked that I couldn't believe, you want the second one? You'll be, even though as product people.

• 1:43:08Speaker 00

  Maverick, and I'll tell you why this movie Maverick, okay, you wouldn't, you wouldn't think I'd be a Maverick guy. But the quality of this product, here's what it was so high. And what's interesting, you remember Maverick was supposed to come out before COVID, right? And it was, and Tom Cruise said, no, he's like, this is gone. This is such a good product. We're going to wait years for this thing to come out. I'm like, I'm not going to like this, this, this. I mean, Cocktail was pretty good, but I'm, I'm not gonna, but, but as a product, when I've watched this movie three times from a product perspective and to what, just like software, when something is done that well, like every, no wasted calories, no way, like I, you see everything tied together. That's the kind of software we love, right? It, it just delights us when it works better than we expected. So those are my two.

• 1:43:53Lenny Rachitsky?

  You also did all his own stunts, which I think is a good metaphor for the VP of Product, maybe being involved in sales.

• 1:43:57Speaker 00

  Actually do, do the work.

• 1:43:59Lenny Rachitsky?

  Yeah, exactly. Oh, man, I'm stretching it. Okay, next question. You answered a few of these already, but do you have a favorite interview question that you like to ask when you're interviewing salespeople?

• 1:44:08Speaker 00

  I, I answered it, but I'll bring it up again in case you do it again is, um, what do you want to do your first 14 days to head a product or head of sales? What do you want to do your first 14 days? It's not a technical 30 day plan, six, you don't have to do 28 slides. It's what I call a Columbo question. Not that I really watch Columbo, but Columbo was this old detective on TV who, I don't know if you ever, he would ask these dumb questions, right? And then, and then the, the murderer would, uh, I thought Columbo was so dumb, but at, by the end of the episode, it always incriminate himself because the question. So when I interview, I always do Columbo questions. They're never tough ones, right? They're always, they're always nice. I don't know if I'm nice, I'm honest, but, but the interview, but then I, so, so, buddy, what would you do your first 14 days as VP of Product here? And, um, they don't want to visit customers, don't hire them for either role, sales or product, just don't hire them.

• 1:44:51Lenny Rachitsky?

  I've got the answer now. That's exactly what I was going to say.

• 1:44:55Lenny Rachitsky?

  Next question, what is a favorite product that you have recently discovered that you really like?

• 1:45:00Speaker 00

  My two aren't really amazing, but I'll answer them. The one I, I, I early, I love this Opus Clip app. For making clips from video. I know you have a whole team, so you probably don't need it. But I produce a lot. I mean, a lot of us do content marketing, right? Whoever does it. And we produce a, I produce a lot of content. I don't have enough time to do this. So the only AI tool that I've found helpful so far is Opus Clip, which takes all of the incredible amount of YouTube content we have, force ranks it and turns it into 59 second clips. And I'm a case study on the website. I tried the early products. They were almost there, right? But it's, it's not, is it as good as a clip team? Right? Is it? No.

• 1:45:41Speaker 00

  But literally in 60 seconds, it can, what's interesting is it can do something I don't have time to. I could never make YouTube clips. I could never make Instagram shorts. I could never make it. I couldn't, it just would never happen, right? It would never happen. And the fact that one product enables you to do something at a minimum viable quality you couldn't do before, like I'm, I'm a super fan. It's, it's, it's, uh, it's pretty interesting. So that's my favorite. And my other one is, uh, is this one. This is the, this is the fully phone that's finally as good as a normal phone. See, there's the terminal list that I've got folded up and it just works.

• 1:46:11Lenny Rachitsky?

  That's wild.

• 1:46:11Speaker 00

  Ways the same as an iPhone. And so the reason it's cool is this has changed the way I do productivity. OnePlus, it's the OnePlus, OnePlus. Yeah. It's the first one that's the same form factor, same weight, same. So there's really no, there's no loss, right? And I just, well, you know, you can use, I can use my normal phone here like I'm using. It's, it's, it's got a little funky, but it's the same. And then to be able to do content, to be able to check, to be able to do full email, full accounting, full everything like, like an iPad.

• 1:46:39Lenny Rachitsky?

  We see your Tesla where it's going. I think it's parked. That's, uh, very cool. So it's basically like an iPad plus a phone in one.

• 1:46:47Speaker 00

  Yeah, I probably use this 50% of the time of the iPad. So that, that's, that's it. That is it. The other ones that didn't make any sense to me. Yeah, it's Android. Yeah.

• 1:46:55Lenny Rachitsky?

  Amazing. I had not seen that. That is extremely cool.

• 1:46:57Speaker 00

  Very cool.

• 1:46:58Lenny Rachitsky?

  Two more questions. Do you have a favorite life motto that you often come back to, share with friends or family, find useful in work or in life?

• 1:47:07Speaker 00

  It's be kind.

• 1:47:10Speaker 00

  When I reflect on my career, right, mistakes, um, the it's when I, I don't, I don't think I'm mean. I, I actually think I care more than most people on the planet. I like to think I've helped a lot of people. But it's not taking the time to be kind at times and um, not taking time to be kind when things don't work out, not taking time to be kind when you leave a situation, not taking time to be kind when maybe someone's done the wrong thing, right? Not taking time to be kind to a customer that leaves, right? I remember in the early days of Adobe, Sign of Echo Sign, we had a top tech customer and we, I killed myself to close this customer, right? Famous, huge, huge tech company today. And then our champion changed, right?

• 1:47:52Speaker 00

  Champion changed a big issue within software and product and came in and brought in DocuSign instead of us. And man, I was just so mad. I just tore into this guy. This guy had actually had dinner at my house, right? And he did it, he actually never, he just did it because it was good for his, his own career, right? And I was so mad, but I like broke the relationship forever, right? That's just one random example, and I just think there's so much advice to, to fire fast and to, to be relentless and do all these things, right? But you've interviewed so many people, Lenny, right? I mean, so many great leaders. Uh, I haven't done what you've done, but I've talked to almost all the top CEOs in SaaS, okay? And they're, they're kind. It doesn't mean that they're soft. They're not soft, okay?

• 1:48:35Speaker 00

  They make tough decisions every day, but they are, they're kind. They, and, and so in this world where everyone feels like they're getting ripped off or they're not paid enough, or I want, you know, founder pay for founder work. This motto really, it's troubling founder, everyone is founder pay for founder. Why you want me to work more than 30 hours, Lenny? I need, I need, I need 30% of the company. I need, I need founder pay for founder work. It's like, I hear you, but you will find that by being totally committed, going 110%, but and also finding a way to be kind, that will like endure across your whole career. So I know it's, right? Because I'm, I think I'm good, but not always kind. It's how I challenge myself all the time. Be kinder in that conversation. And the big epiphany, we already talked about it.

• 1:49:17Speaker 00

  The big, it shouldn't have taken me this long to realize that anytime an employee fails, it's your fault. Be kind. You hired them. They never knew what they were getting themselves into. If the job's too hard, if they're, if they lack the skills, if there's not enough budget, if there's not enough people, if it requires too many hours of work, you should have known that, not them. Be kind. Be kind to every single person on your team that doesn't work out. That's not just putting together an email spreadsheet and sending it out. Try, try harder, be there for them, be kind.

• 1:49:44Lenny Rachitsky?

  Be kind. I love this. I know that you actually, your username on Twitter is, includes be kind in your.

• 1:49:51Speaker 00

  It's a reminder. It's a reminder.

• 1:49:52Lenny Rachitsky?

  Yeah, so you really backed this up. Amazing. Okay, final question. You run a giant conference, SaaStr?

• 1:49:58Speaker 00

  Yes.

• 1:49:59Lenny Rachitsky?

  First of all, just talk about what it is so people know and explore and check it out. But the actual question is, what would surprise people most about running a conference like this? Things that they now think about goes into running a conference like this?

• 1:50:13Speaker 00

  Any business, no matter how weird it is, that's at scale, like the best one in it, like, it's always interesting, I think, for case studies, right? The best, what, pick anything, the best, the best cup maker, whoever it is, whoever makes the best, like, this is not an interesting business, the Starbucks Cup on its own, but the best person, I pretty much guarantee you there's a good, good story there, right? SaaStr is a community as well, like you have. We started this really early in 2011, 2012 for B2B founders back when that seemed like a weird thing to do. Now it doesn't seem so weird. So we built a lot of content and, and we started doing events and meetups. I never did a meetup. You do a lot of meetups, but when I did meetup, I'd never actually even been to one. So I did meetups in 2012 and 2013, but like a thousand people came to the meetups. Like, that all

• 1:50:56Speaker 00

  makes sense to you today, but a decade ago, for B2B, it was pretty, like, people were like, why are all these people here? We thought there were six of us that cared about B2B. So then we did a big event. We did a one day SaaStr annual in 2015 and 3,000 people came, including the evening. And so we just kept going. So we get about 10 to 12,000 people together a year. What that means has changed. It's no longer novel. I'm not the only person producing B2B content anymore. I'm not the only founder that sold their company, like in the old days. There's plenty of much more successful founders and better, I certainly don't, I don't do many, very many podcasts, because I'm not a 10th, 100th as good as you. I do like one a quarter, for example. But the, but the events have become this meeting place for founders that have hit scale, that are somewhere between 1 million

• 1:51:38Speaker 00

  and 20 million, and especially folks that aren't in Silicon Valley, especially folks that aren't sitting in Hayes Valley or wherever, that don't have a community. And that surprised me in the beginning, how many international folks would fly all the way to the Bay Area. I remember this founder came from Perth, Australia for the first session. I'm like, thanks for coming, but this is a lot of work for it. He's like, I didn't come for you. I came because there's no one like me in Perth.

• 1:52:00Speaker 00

  So it's taken on a life of its own. There's a lot of learnings. I think I, you know, it was, I didn't intend to do mass scale events. I intended to just do meetups because I had a community like you do meetup. So it was not, it was absolutely an accident. The learnings are it's extremely expensive. It's extreme and it has this weird curve. Okay. That's this weird curve where if, and this is important because I think actually all founders, all startups should be doing events for their own customers, at least steak dinners every night. You should get your customers. If you get your customers and prospects together, you sell more. Get your customers and it does not need to be a million dollar or $10 million event. It can be roots, crisps. It can be whatever. Does not even mean fans. Just get them together.

• 1:52:39Lenny Rachitsky?

  Has to be steak though.

• 1:52:41Speaker 00

  Yeah. Well, no, but steak does work. I mean, I'm not a big steak guy. It could be any, just something nice where they want to go. It just where they want to go. Your customers will sell your prospects for you. Your customers will do the selling for bringing them together. Um.

• 1:52:55Speaker 00

  When you, when you do it really small, it's cheap because how much does that back room cost at the steakhouse? Right? It even costs, it's worth it if you get one big deal out of it. Right? And then you graduate and then you'll do like a meetup and like you'll do it at like someone's office, some tech company. They'll give it to you for free. They have an extra office. That costs nothing. Right? And then you're like, well, that one, well, we got a hundred, 200 people came to Lenny's thing at Digital Ocean and then, and then you say, you know, I'm going to, I'm going to do an event and then, and then you rent like a theater, a disused. And these theaters are actually kind of cheap because like they're dark during the day. Like there's not a lot going on and a lot of like, not movie theaters, but like, uh, you know, music. So those are cheap and, but then like, you're like, well, there's only one stage and it smells like beer. So like, then the next year you do a hotel and hotels pretty expensive. It's like half a million, 800,000.

• 1:53:40Speaker 00

  And I hated hotels, but you know what I learned from this model? It's turnkey, Lenny. So your marketing manager can call up the Hilton in any city and in two weeks spool up. Uh, some mediocre AV, some mediocre chicken wings and drinks. Okay. And you, you and I don't like to go to the Hilton that much, the ball, the ballroom C. We don't like to go to events, but it turns out your customers don't care. They're just, they want to be together and talk about your app, right? And then if you do community like you do, you could probably charge a couple hundred dollars for tickets and get some sponsors and bring in some revenue, right? And, but then after Hilton Ballroom B, it costs like $2 million to turn the lights on. And SaaStr Annual, so, so our Europa event in London's in early June, June 4th to 5th. Please come if you want. That costs $2 million to turn the lights on in London.

• 1:54:24Speaker 00

  To turn the lights on in the Bay Area for 12,000 people in September, in the Bay Area, which is the most expensive place, right? It's $10 million to turn the lights. Holy shit. It's $10 million to turn the lights on. Now I'm, I'm being a little expansive in what I mean by turn the lights on. But this is what it's going to cost you. It's going to cost you about a thousand dollars per attendee in the Bay Area or Las Vegas to have a mass scale of it, not smaller, not one day in Grand Ballroom B, but a multi-day event, right? The AV is 1.5 million, the food and beverage is 1.5 million. The tenting is $800,000. I keep going. So, once you get to like 20, 30, 40 million in revenue, quietly, there's public companies out there. They actually become, they have software-like margins at that scale. But before that, it's brutal, right?

• 1:55:09Speaker 00

  And when I started doing these events, I interviewed the head of it back before March 2020, when tech companies did their own events, they've pretty much given up, which is an interesting side topic, big, not big ones, like big, not small ones, but big ones. But I interviewed the head of events at everyone, right? At Twilio and Marketo and da-da. And they all be like, well, how much, how, how'd the event go? It'd all be the same. Well, we brought in about 1.5 million revenue. Oh, okay. And we lost 2 million. Everyone lost 2 million. Every single one lost 2 million. And you can see in the financials, even Zoom in its scale just announced how much money they lose at Zoomtopia. So it's a terrible business. It has just, what I like to say is it has diseconomies of scale. The Lenny's little free meetup costs zero, right? And then the one at CloudFlare's office costs zero.

• 1:55:50Speaker 00

  And the one at Hilton, at Hilton B maybe costs $200. But then it costs $1,000 per person at scale, right? Even more like Moscone, like in San Francisco, it's probably Moscone. So you're approaching $2,000 per person because you have to buy about 15 to 20 million dollars of hotel nights to do an event in Moscone, right? So I don't know if that's a, we could do, I mean, it's a side topic, Lenny's side podcast of people that care, but this diseconomies of scale, but there are a handful of public companies that do like ConLions, Money 2020, Shop Talk, a few others that are at SaaStr's scale, and they cobble together these very profitable public companies, but they all got to do at least 20 to 30 million because you've got to get over a 10. And it's intimidating to get over a $10 million nut, right?

• 1:56:33Speaker 00

  And so what it means is we have to spend like 14 to 16 months each year planning for SaaStr Annual because it's not that fun if you fall six or eight million dollars behind. That's what happened in March 2020. We were the first major event to be canceled by COVID in March 2020, the first one. RSA happened for security the week before, then we got canceled. So we lost $10 million in one day and it took a long time to dig out of that hole, uh, Lenny, uh, especially since we monetized like nothing, it took a long time, but they're worth it. They're worth, and you, I know you don't do traditional events, but you do do meetups in your community and I know they're worth it. I know they're worth it. Bringing your customers together, bringing your community together. And we talked about this offline before we started, second tier, third tier events,

• 1:57:17Speaker 00

  I do not think are worth it because they do not attract the best people. It's just a fact, we don't, most people, it turns out from our, from our founders are our core ICP. They go to two events a year on average, two events a year. Okay. And they'll do other state dinners. So if you go to one of the two that they're at, you just might bump into Jeff Lawson or Eric Wan or whoever the next one, they might be there and that might be one of their two, but they don't go to number three through 10. They don't go to the so so find my role in general is people wonder, should I go to events? Is it worth my time? It's a waste of time. I know you've thought about it. My and I the irony is even though we produce events, I used to think that I didn't want to do events. I just want to do meetups, right? I just wanted I was shy. I just wanted to do meetups.

• 1:57:59Speaker 00

  But then I learned over time that the best events bring the best vendors, the best executives, the best everything together. So pick the one or two best events in your industry. And even if you're antisocial, try to go to one or two a year. Go along, it pays off. It pays off, but don't maybe don't bother with the rest, even if they're ski slopes or they're fun that the subscale subscale just doesn't work for meeting and marketing to people. It just doesn't work.

• 1:58:24Lenny Rachitsky?

  I said at the top of this podcast that there's a billion things that we could talk about, and I think that's exactly what happened. We can go in so many directions and that alone was extremely interesting because people want me to run a conference and I really don't. And I really enjoy the meetups that we have now. And we actually do have sponsors that cover drinks and food and things like that. And they're very chill and I really love what happens at those things. But yes, this is really good information. Jason, I have two more questions for you that I ask everyone. I think we went through a couple of these things, but just real quick, where can folks find you if they want to reach out and maybe follow up on some of the stuff you talked about? And well, how can listeners be useful to you?

• 1:59:03Speaker 00

  In general, just go to this kooky URL saaster s a a s t r dot com. That's a way to access a lot of what we're talking about. If they want to reach me, to be transparent, I get a lot of inbound like I'm sure you do. It is to be be be honest, guys, it is hard to process the amount of inbound that folks get, right? But it but I'll give you an insider tip like I do see almost all of it. So if you want to reach me, if you just want like an hour of my time randomly, I don't have I'm sorry, honestly, I'm sorry, I don't have that hour of time. Okay. But if you want to interact lightly, every I mean, I I'm on Twitter all most days at Jason L K. I'm on LinkedIn, LinkedIn a lot on just search for me, Jason Lemkin. LinkedIn's pretty cool. I have 260,000 followers. We have really good conversations.

• 1:59:48Speaker 00

  And I will tell you if if if you have a question like you really need some help in your business or you want to do a pitch. If you send me the world's best email pitch, I will read 100% of them. Like, track it. Put it in Mixmax, put it in HubSpot, put it... You will see I will open that email if the title's good. It doesn't mean I can respond. I'm sorry, I know Lenny can't respond. But realize it is gonna be read. If you need a favor, like a help, if you ask the question super discreetly, like, "Jason, here's the LinkedIn, I'm Lenny, I'm trying to hire this person. I'm at 4 million ARR doubling, should I hire her?" There's a chance I'll look at that LinkedIn and tell you. Or if it's one question, but if it's an hour or coffee, it isn't gonna work. But it is gonna get read. So do that by email. Do it even by LinkedIn. I didn't used to read those LinkedIn emails, but if it's really good, I will read it.

• 2:00:33Speaker 00

  And I probably respond to five or six of them a day. I give, to the extent it's helpful, free answers, free advice. Not that I charge for anything, but, but make it good. Don't ask for coffee. So many folks have written this, the most important people in the world read email. It's an open medium, right? And a subset of the folks actually read their social media. Even Elon Musk reads his, you know, before he bought Twitter, he read it. People, you can access almost anyone in this industry. Just be super strategic about how you do it. Put, again, put yourself in your shoes. Would you answer this? Would you do this? But I would say half the stuff gets opened and read. So I know that's a rambly answer, but first, we talked about sales. You can reach anybody in the world via email. It's magical.

• 2:01:11Lenny Rachitsky?

  I'm sorry for the many emails you might get from this podcast. That is actually really good advice, resonates deeply with me as well. Jason, thank you so much for being here.

• 2:01:21Speaker 00

  Thank you for all the time, Lenny. I'm a super fan. It's great, great to be here and let me know anything I can do to support you or your community going forward.

• 2:01:27Lenny Rachitsky?

  I really appreciate that, and the same in reverse. Bye, everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lennyspodcast.com. See you in the next episode.