Bill Bing

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Feb 23, 2017 · 18 min read

1. At all levels of the organization, it is critical to constantly engage with customers to understand what they like and dislike about your product, how they use it, what their challenges are, and how you can better serve and satisfy them.

“Domo doubled-down early on focusing on customers and customer happiness. Didn’t have product drift but tried to understand customers that say they need features to understand value of the feature request. Opened up a huge amount of new customers for them.”

“Jeff (CEO of Twilio) described the process of product development/iteration where you hear feedback from customers that your product needs certain features and you write them off initially, but eventually you realize that for certain customer segments you need these items (for example, enterprise vs. SMB customers).”

“David Skok says to start with your customer, understand their business goals, identify their decision criteria, design and optimize a funnel around their buying process. More deals in funnel with same conversion rate = higher bookings. Sales people have capacity limits though, so unit of growth becomes Sales people (work with quota, then how many leads to get to that quota, etc.) The math is number of sales people multiplied by productivity per rep.”

“Jyoti of AppDynamics says you have to break the walls between engineers and customers. Make them visit customers and do support. Doing a phone call isn’t enough. You have to visit them. It fundamentally changes alignment. AppDynamics grew from $2M to $300M in 5 years. 40 employees to 700 in 4 years.”

“Marketing Panel said reporters get really tired of talking to CEOs boast about the features of their products, they want to talk to customers. If you don’t have someone in the company who really knows how to work with an agency you aren’t going to get your money’s worth.”

“David Skok says the best way to sell is not to sell — make a deposit before you try to make a withdrawal. Start with your customer, understand their business goals, identify their decision criteria, design and optimize a funnel around their buying process. Address the different elements where things break by thinking about the customers’ mindset.”

“Relationship of CEO and VP of Sales panel said that the first VP of Sales has to get into direct Sales role initially. If you don’t understand product-market fit, sales cycle, all the metrics, it’s really hard to evaluate the Sales team. Need to interview every single customer and understand what they’re doing with your product and what they think about you. Over time they learned from customers where they needed to direct product efforts. Critical to continually speak with customers to understand what they need if you want to build something truly valuable and not just something you hope people will buy. Focus on long-term growth and opportunity, not short-term growth that hurts long-term value.”

“YC panel said just focus on the customer, don’t get caught up in the noise or hype to grow by X% year over year.”

2. You must know who you are as a company, what your value proposition is, how you are different from competitors and why you exist in the market. Your team and Board should all be able to provide the same answers to these questions.

“CEOs role in marketing panel said one area that can’t be abdicated is around the overall positioning of the company, how you want the company to be perceived, and work with marketing to create the messaging. Work with marketing to define 4 or 5 basic answers. Who are we? How are we different? What are the benefits of our product? Positioning happens in the mind of the customer, and it’s usually about very simple things. Valuable internally too once you get beyond a certain scale so that everyone can understand your purpose and mission.”

“Veeva CEO says not knowing what something is worth is not OK — the price you set is self-fulfilling about quality of product. If you make it cheap people won’t think it’s good. If it’s expensive you can’t accept problems because it’s a premium product. The better your team, the more you should anchor high and it starts with the CEO. It must have the value that you assign.”

“Aaref of Sequoia Capital says SaaS lends itself to metrics, so people can get lost in the metrics and lose sight of what it is they’re doing in the first place. Then suddenly when the metrics don’t look good people freak out because they’ve forgotten what they even mean. Train the board to know in 3 sentence what you do, why it’s better than the competition and how you will win an important market.”

“Jyoti of AppDynamics says to keep things simple for people — 10 to 12 points that everyone understands and can recite. Who the customer is, why you exist. The management team would draft these 10–12 things quarterly at off-site and that would set the tone and then it would be passed down and was the North Star for everything else.”

3. The most successful companies Do NOT scale prematurely and are highly disciplined about following growth stages in order. They focus on growth only after building a repeatable sales model with understood unit economics. Doing otherwise is asking for trouble.

“Biggest mistake Hubspot CRO sees is a premature focus on growth. Going into growth mode too quickly got early traction on product market fit, hired EVP of Sales, ramped team, revenue wasn’t growing as quickly as planned, Salespeople started leaving, finger pointing began. Problem was that they jumped ahead too early. Develop predictable sales model and THEN hire VP of Sales, etc.”

“Veeva believes in the headcount driving growth, but intelligently and conservatively once they know the formula for what they would generate. Would rather leave top-line revenue on the table because a desperate rep will do desperate things and that will have a negative trickle-down effect on the customers. Don’t over-cover with reps or they will grind to close bad deals to hit quota.”

“Veeva CEO never had a plan that extended beyond 90 days in the first year and a half of the company. Why bother when you could be out of business? Only quarterly plans. Then graduated to annual plans, then later graduated to 3 year plan. Just now working on 5 year plan.”

“YC founder panel waited to focus on growth until they understood the customer so well that they perfected product-market fit. Then deployed capital on Sales. Too many companies put the money to work before they’re ready. Probably the number 1 thing that can kill a company. You can fake growth for a little while, but if NPS and retention aren’t where they need to be it doesn’t matter. Retention is a better predictor of success than growth rate.”

“Zendesk from $1 to $10 million — Lot of trying and failing, took 18 months to go from $1 to $10 million. Built the team during this phase, hired in San Francisco where they had no network. Funnel model was their business (and 90% of SaaS companies). Back then, that was a novel concept and people weren’t sure if they should do that, but it was extremely valuable.”

“Zendesk from $10 to $100 million — This phase took about 3 years. Shifting gears for the business, as prior to this point they didn’t really have Sales. You have to make everything as simple as possible for your customer — remove all friction for the customer. Started segmenting the market at this point as well. Packaging and pricing is a constant exercise, and being really flexible for pricing and packages can be very disruptive. “

“SDR Manager panel said it can take 6–12 months before you have data you can need to really build and optimize a model for SDRs. Warned not to underestimate the infrastructure required to build an outbound Sales team. Product-centric companies often discount this. Couldn’t even put a comp plan in for 6 months. If you put it in too early and the quota is too low people get excited and then you raise it and they get mad or you set it too high and they get frustrated and quit. Put in a training program that helps them be successful and then build a process that helps them be efficient. Create a solid process for hiring. Need builders, not growers initially.”

“Brad Feld said there’s a belief that you have to grow at a fast pace to generate a higher valuation and ultimately a big return that’s interesting for investors. Sometimes that’s not entirely true, as you can have churn or you can have other problems that you create. Getting everything in balance is really important. Many successful SaaS companies Foundry invests in stall at some point but then regain their momentum.”

4. You get what you incentivize, which means you can get whatever you want if you incentivize the right things the right ways.

“Domo CEO says to spend a few days each year on detailed comp plans and calls them the most powerful operational weapon you have. They insure alignment. CFO once walked into his office and said “We can’t close any more deals, we have to stop.” They had cost ahead of Sales and they had limiting factors on hiring due to a particular manager. So he gave an incentive to that manager and said for every person you hire I’ll give you $1,000. Problem solved. Gave the CTO an incentive on every % point he could increase gross margin, and he grew it 12%. He loves incentives.”

“SDR Manager said they had discussions with new hires about career path and they didn’t really understand it. So they created a 6 tier career path that wasn’t based on time. It was about passing a test, setting X appointments and close Y deals, close over $Z in new deals. There were rewards for each promotion — additional equity or base, etc. Made it exciting for the team members. By the time they graduated they were basically an AE.”

“Hubspot CRO says that churn at Hubspot was rooted in the Sales compensation plan. They factored churn into compensation plan, and tiered comp based on LTV tiers. Churn dropped by 70% in 6 months. Critical that comp plan aligns with business goals. Also, Hubspot did a reorg to align GTM by Customer persona rather than Function. Organized cross functional teams of Sales, Services and Marketing by customer size, all in one group. Teams bonded and worked hard to help each other.”

“SDR Manager from panel said the biggest mistake he sees is too many SDRs throwing meetings to AEs. Created issue with alignment and numbers of SDRs vs. number of AEs. Should have comped on revenue and success of deals — not on setting meetings.”

5. Sales can be broken down into a series of funnels and micro-funnels which can in turn be evaluated at each stage to identify and resolve blockers. If you provide enough value, you can overcome any blocker. If you can figure out how to do that you can overcome any obstacle in your pipeline.

“David Skok presented a model of Sales as a funnel (link: http://www.forentrepreneurs.com/saastr-2017/). Funnels are driven by simple math — 2 variables. How many things do you put in, and what is the conversion rate that you produce? The two primary sales tactics are touchless self-serve, and using outbound sales people. Touchless — drive website visitors to free trials to conversion into paying users. Focus on conversion rates before worrying about filling funnel. Improve simplicity and clarity of messaging.

Asking “what would break if you tried to grow your ARR 10x?” identifies funnel issues and blockers. Blockers occur because you want a customer to do something they aren’t motivated to do. You are promoting your desires, not the customers. Assess friction and redesign the step or address the underlying concern by creating a motivation big enough to pull them past the concern.

Identify “Wow!” moments and figure out how to capitalize on them by putting yourself in the mind of the customer. What is painful, what has friction, how can we address those concerns? Hubspot Website Grader as example of free tool that drives viral activity. Grade builds competitiveness and results in people wanting to reach out for help to increase conversion rate.”

6. Freemium tactics applied to enterprise sales models can be very powerful.

“4 Key functions evolved at LucidChart when they added Sales: Support Sales, Digital Marketing DemandGen, Support Customer Success, End-User Focused Enterprise Focused.

They developed processes for sending users from Support to Sales based on perceived Sales interest and intent. Support team did a great job of creating referrals from these support requests. Also had questions about integrations, so a Sales rep would engage and get involved. Over a period of time they added 6 figure ARR. Lots of value spending time in the Support channel.

Moved from Digital Marketing to DemandGen, they added a phone number to the pricing page, forms for people to reach out, also used marketing automation based on what pages people visited. If they get a response they engage. Essentially they found ways to connect with customers who demonstrated certain activities in order to feed the funnel.”

“AppDynamics CEO learned how to sell by studying other companies. Studied both ends of the spectrum — enterprise heavy duty Sales and freemium lightweight sales. He found some companies trying to merge the best of the two and attempted to emulate that model. Land and expand approach combined with field Sales. CEO closed first 6 customers, then recruited the #1 guy from competitor and he closed the next several hundred.”

7. For conviction on price negotiation, sell yourself on the value first and then hold your ground.

“Veeva CEO says the secret to defending pricing is to sell yourself first. If you’re selling something YOU get to set the price. If they don’t want it it’s not your problem. Otherwise you’re always floundering and lack confidence in deals and negotiation. You can’t let uncertainty of the market affect your plan. Need to plan with confidence and then adjust if you end up being wrong vs. letting uncertainty cloud your plan. Need to be aggressive as well. Put a number on things. Don’t be reckless though — be honest about the capital and intellectual capital you have to achieve your goals.”

“One of Veeva’s solutions is to help people collaborate on clinical trials. A customer might have 4,000 people working on it and they need a system to make them efficient and get the drug approved. That cost would be hundreds of millions of dollars, so that problem requires a high price. Focus on value. What do you solve and what is your impact and then sell that value.”

8. How CEOs and top execs on spend their time, manage boards, communicate with customers, and think about exits is absolutely critical. It is also undervalued and people don’t focus on it enough.

TIME MANAGEMENT

“Jyoti (AppDynamics CEO) spends a lot of time with customers. He has a rule of thumb for managing his time: 1/3rd time with engineers because he is a Product guy as his core discipline. 1/3rd with customers, and 1/3rd operating the business, board, hiring, managers. Most CEOs don’t spend enough time with customers. Jyoti also says CEOs need to work on developing in 4 areas. Technology, Business, People, and Sales. The job of the CEO is selling all the time. Customers, employees, investors. Have to become very good and comfortable with it. You can call it inspiring if you want, instead of selling. Need to continually work on all 4 areas.”

“Jeff (Twilio) spends a lot of time meeting customers now — at least 3 a week — not doing speaking gigs and PR. He feels that sets the tone for the company on being customer-centric and also has the maximum impact on performance.”

“Russell Fradin of Dynamic Signal said that at Series B stage, a CEO still should be spending at least half their time with customers. VP of Sales needs to be able to scale, hire, build process and engage with customers as well. When you’re Series C and beyond it’s easy to spend your time with your very best and worst customers. Need to do that, but also need to spend time with mid-tier customers and all of them really. Even today, the CEO spends half of his time with customers and prospects.”

“YC panel said after getting past 100 people you have to focus on 2 things per quarter you really want to happen and put energy there. Figuring out how to use CEO time is maybe the most important and high leverage item and people don’t spend enough time on it.”

“VP of Sales panel said having the CEO go with reps on sales calls on the road as a training mechanism and also reinforcing the company message. Also helps get everyone delivering the same message.”

BOARD MANAGEMENT

“4 Lessons on Board Management from Aaref Hilally of Sequioa:

#1 — Don’t manage the board, engage them — The board meeting is for the Entrepreneur, not the investor. It’s a chance to think bigger picture about what you’re doing and need to be doing in a 6–12 month timeframe. Talk about is what is most on your mind.

#2 — Focus on product and vision over metrics. This goes against the mantra at SaaStr a bit. Train the board to know in 3 sentences what you do, why it’s better than the competition and how you will win an important market. If they can’t do that there’s going to be problems when you miss a quarter.

#3 — Own the miss. Any good investor will have seen all of this many times before and your reaction is more important than the miss. Show the board it matters to you and you take it personally. Be honest about what you and the team did wrong and help the board process it. Send out information in advance and own and control the meeting. Address it right away when the meeting starts.

#4 — Put the board to work. The reason you have a board is to help you in the hard times. Investors are often more enthusiastic about a company after they miss than before because founders with the grit to survive the hard times are much more likely to succeed in the long run.”

M&A AND EXIT STRATEGY

“M&A Panel said when thinking about an exit, leverage your VCs and your networks to get to know people. Start to build relationships early so that later it’s not a reactive execution-oriented move, but a pre-existing understanding of the business. Start with low-pressure, casual discussions. Provide updates.

Build a great company, not a company that looks great at exit. Focus on profitable growth, NPS scores, defensible technologies, not trends or what’s hot today because you think it’s going to result in a better valuation down the line. It might not be what’s best for the business. Focusing on the fundamentals will results in a better exit long-term.”

“Corp dev highlights: corporate VC goal is to help them grow rather than make a huge amount of money Salesforce asks for a notification right but no blocking right or ROFRs. Usually helpful to the companies because it helps them create a process. M&A advice is to build out a partnership with a potential acquirer or 2 or 3 of them. They get to know your technology, learn more about you, which provides proof points and can create champions within the company to vote for the acquisition.

You always want to start off talking to the business people, not Corp Dev. John takes his cues from the reaction of his Product and Sales teams before he engages, because they have to have a sponsor from one of those teams. Reach out early, once you have a product in market and with early traction with customers. Don’t be secretive or stealth.”

9. Hiring the right people is absolutely critical and leaving underperformers in key roles for too long can kill your company.

“Domo CEO says to recruit executives like you sell big customers. Best ones are often happily employed. They try to give a red carpet treatment for people they identify and put on full court press. Treat it like a big deal you’re trying to win. He spends 25% of time recruiting. Early on spent 50% of time on recruiting, then rolled back to only managers, only directors, over time. He likes to knock down people who act like big shots. Always try to ask something that makes them uncomfortable. “I heard you’re an asshole — talk to me about that.” Even VCs. He wants to be pitched too, come across as a nice guy but make sure the pitching is coming both ways. When people feel like they can’t have something they want it more.”

“Domo CEO also recruited people from his prior company but he lost the wonderful thing that happens at a brand new company where people are trying to make a name for themselves. Lose some of that fire and energy because people feel like they’ve been there done that.”

“YC founder panel says biggest mistake was staying in the loop with hires underneath direct reports. Need to let that person develop the relationship and not go around their managers. One of the hardest thing for CEOs because they want to stay in control. Hear someone is unhappy and instinct is to dig in but you have to resist and let them handle it. That’s why you hire an exec.”

“Promise Phelon of TapInfluence says she thought she would sell everyone on the value of moving fast and scaling. The motivation of her team was different than in the Valley. Promise’s focus on selling a billion dollar vision didn’t work in Boulder. Leaders in her organization have to have extreme ownership and a desire to have an impact. Free lunch isn’t culture. Iceberg model where the little things like ping pong tables are visible up top, but what really matters is underneath — growth and learning, rewarding performers, developing people, winning as a habit, and transparency. Not just about the perks.”

“Veeva CEO says execution is underrated. He likes trains to run on time. His Dad always said “good enough is not good enough”. As you get to scale, it’s about engaged teams working together. Managers need to trust other teams and manage their own team. Execution matters most, he spends 90% of his time executing, what am I doing today, this week, and this month? Write it down and measure yourself against it. That’s what matters.”

“Engagio CEO is doing things differently this time: trying to build a great company with teamwork as the ultimate competitive advantage. Smart companies vs. healthy companies. A healthy company with average smarts will beat a super smart company with only average health. Also focused on teaching how to be a good team and work effectively. Pyramid with trust at the base, then conflict, then debate, then clarity, then commitment, then accountability, with results at the top. Whole team needs to reinforce. Put company needs before department needs before personal needs. Make sure core values get pushed into operations and processes like hiring, perks, development, raises, office environment and so on.”

“Domo CEO says he likes when 6–7 reps come into his office and do a sit-in asking for another manager. Until that point he’s not doing it. He doesn’t buy into you have to have a manager for every 7 employees etc. Otherwise you’re adding overhead you might not need.”

“Hubspot CRO says your first Sales hire should be an entrepreneur-minded generalist (unless the founder has a Sales background in which case recruit the #1 sales person from another organization). Avoid the Experienced VP type until later.”

“During interviews, focus on getting a level of detail for process and steps and sales tactics, and if they can’t explain it in detail that’s a problem. Look for people who have been somewhere for a period of time, had some success and progress, and can tell a story of how they accomplished it.”

“David Skok says the main reason for missing plan is not hiring good Sales people fast enough. Missed bookings is due to slow hiring. Performance to quota should be ~85%. Productivity per Rep metric shows quality of sales hires, training and onboarding. Onboarding and training make a big impact and can be controlled — less control over hiring. Color-coded chart by rep to identify who is consistently doing well and who is not. If everyone is consistently doing well then you have a scalable business.”

“CEO Panel on Hiring said CFO is critical — help with financing, comp plans, pricing, budgets, cash flow, let the CEO understand how much they can spend. 500 person company CEO said the worst thing that can happen is to bring in a senior person and have it not work out, because it takes a long time to fix their mistakes. If you don’t know exactly what you need, you probably shouldn’t make the hire. If you have a need, meet with people to learn more about what you need before looking for a candidate. On the flip side, if you hire someone who isn’t working out, trust your gut and fire them quickly.”

“(Discussion re: terminating leaders) — CEO is typically the last person to recognize that a VP or senior leader needs to be fired, so by the time you become aware of it, you need to act. People who report to a leader have recognized their shortcomings much sooner than you have and are already frustrated with them. If you don’t act they will become frustrated with you and the company in general.”

“Brad Feld said to segment a company into 3 teams — Product, Customer, Company. Early on a founding CEO will likely spend too much time in their core discipline. Some people can scale and perform, but you need to experiment to discover who they are.”

“Stripe COO Claire Johnson says be intentional about who and why you want to hire. At Stripe the hiring manager writes job description, creates interview framework and group interviewing candidates, and develops assessment criteria, so the recruiter is more of a process coordinator than the person running the show. Buying into mission is critical for hires, and retention is keeping that fire burning and passion about the business. They do an employee engagement survey and assess results, see if they can make changes if results aren’t great.”

“YC panel said what works is when there is genuine excitement about serving customers. Ownership mindset is key. Are you a driver and do you understand why you did what you did? Ask VP of Sales candidates to tell you about their best reps and why they hire them. If they don’t know it that’s a red flag. Just hired an engineering leader who was a leader first and an engineer second.”