- Don’t scale it until you nail it!
- Supply has never been worse and demand has never been higher
- Your first 50 deals need a Sales puzzle solver
- Selling beyond founder led sales needs strong Product Marketing
- Unit economics are wasted without strong Customer Success
- CRO’s roles are demanding and draining, but has the pandemic changed that?
Setting the scene
Dan co-founded Erevena over 20 years ago, with an initial focus on hiring executives for B2B software companies. In that time he’s seen the market change and evolve, with the emergence of EMEA as a startup powerhouse, combined with new fast moving software categories. The war for talent is as strong as ever, with demand at an all time high for scaling and growing startups. In this interview, Dan unpicks how founders should think about who to hire, and in what order, and where things can go wrong.
Erevena have helped many of the most recognisable names in Europe Tech hire their leadership teams, and Dan’s learnings are invaluable. A must listen for all those who don’t want to make the mistakes of founders before them, and end up churning their most expensive and valuable people.
From philosophy graduate to working in B2B tech
I fell into that space straight out of university. I was a philosophy graduate, and typically philosophy graduates have no clear path to any kind of vocational career. I was lucky enough to join a headhunting firm that happened to be focusing on the technology space. Alongside the team I was working in, we were the youngest people in the office, we were given the internet to have a look at, which was fortuitous. This was when people like electricity companies were trying to use dial up over power lines- it was a super exciting time to be in tech!
I started to move towards B2B software. I think myself and a couple of people in the team thought that we could go our own way, and we’d learn from these great, really nice, experienced people that we’re working with. Myself, David Grundy, and Jon Irvine, who’s still my partner at Erevena today, decided to start a company. We had a slightly strange thesis at the time and the thesis was, we didn’t want to build a recruitment company because that would be a stupid thing to own as they don’t make money while you’re asleep. But, they weren’t worth as much money as all these exciting software companies we were trying to build. We actually had an idea that we would work with people that we knew and, initially, build their go-to-market teams on the B2B software side.
We were lucky enough that we were good at the recruitment side. When we started there was an incredibly nascent venture scene here. We worked with companies like Zendesk and Cramer Systems. In our spare time, we co-founded a couple of software companies. Alongside some other co-founders, we built a platform called Invenias to run a headhunting firm, which we raised venture capital for. We scaled that to around 2000 customers, and sold it to Bullhorn when it was owned by Insight Ventures in New York. That was a nearly 11 year overnight success story, and that taught us all that we should not try and build software companies as that was a discrete skill that we weren’t completely equipped for. But, it also taught us that we almost, by mistake, had built a search firm with a growing reputation in what was an evolving VC tech scene in Europe at that point, which was exciting! Now, 16 years later, we work with the majority of the well known VC funds, both in Europe and in the US. We have offices in San Francisco, New York, Stockholm, Copenhagen, Paris, and London. We still do a bunch of work in B2B tech, and we also work across the rest of that tech ecosystem e.g. FinTech, healthcare, education, marketplaces.
There is opportunity for our ecosystem to grow and mature further
In terms of the market, I would absolutely agree it is as hot as we have ever seen it! I used to see Europe as a sort of a discrete backwater, akin to New York, because they were both slightly inferior tech ecosystems to California. These days, we view it slightly differently. There are a bunch of global companies being built at extremely high velocity, a number of whom were founded in Europe. For example, if you look at a UiPath, Datadog, or Collibra, many of them were founded by their technical team in Europe and very quickly migrated to the east coast. Again, depending on their go-to-market strategy more often than not, they build out there where they perceive the talent pool is deeper, and that’s obviously been an incredibly successful strategy. But, there are talent pools in Europe that are equally well qualified to scale and build global software companies.
If you look at the different kinds of go-to-market models, like volume, SaaS or developer first, I don’t see the gigantic advantage of building out of New York or Boston from day one. I think there’s a lot of very capable execs in Europe that can help you do that. What’s interesting is that those execs do not have the network and relationships with a Tier One VC that you will see in the US. There are much, much closer connections between venture and large scale tech, than you see here. That is a way in which our ecosystem needs to mature further.
Finding the perfect GTM person fit as a founder
When we’re talking to a founder, or in fact a small scale business, we look at the functions in their business as a continuum. So, trying to draw a continuum from a developer to a customer success person, and in the middle of that you have: engineering leadership, product management, product marketing, performance marketing, sales enablement, and understanding where the strengths or weaknesses across that continuum is really helpful. If a company is relatively early stage, and relatively early in terms of finding product market fit for example, we think that magnifies the need for someone who is a thoughtful, and frankly smart sales leader; a good partner to the product organisation and a good partner for the marketing organisation. In truth, if you have an unbelievable product market fit, and all you need to do is put your foot on the accelerator and go from 100 to 500, you don’t need that product partnership because the product is baked. You might want their input once a quarter, but actually they can sell what’s on the truck and that’s totally fine.
One of the big challenges with early stage businesses is often they will look at a resume of someone that’s been through a scaling journey, but slightly oversimplify when they join that scaling journey, and they will underplay the situational kind of relevance to where they are. I was working with an entrepreneur and we were actually talking about why they didn’t feel that things would work out for them as a CEO, and they said that they tried to scale it before they nailed it. They’d hired a bunch of people, built the sales, infrastructure, and all those sorts of things, but they hadn’t quite worked out that recipe of ‘how do we scale the business?’ As we all know, it’s all in the numbers and it’s all in the unit economics. It’s all there in your cost of acquisition versus your lifetime value. If you are not in data, in top shape with your unit economics, you shouldn’t go hire 1000 salespeople and think that sales will work it out for you. A lot of it is about making sure that the person is situationally relevant for the moment in time that a particular company finds themselves in, and they are all, to some extent, unique. But, everyone’s running their own race, and it’s important that founders are thoughtful about that when they try to implement a playbook that they’ve seen elsewhere.
‘Supply has never been worse and demand has never been higher’
There’s a few issues in markets at the moment. First of all, because of valuations, if execs are doing well in a company, they have never been less likely to move, because ultimately their numbers if they believe their valuation metrics, most people doing well are sitting on a life enhancing amount of money to some extent- that’s in big and small companies alike. So, if you’re sitting there in Salesforce, you are earning more from it than you’ll ever have done before, it’s similar for Workday, ServiceNow, and others. It’s not as easy to just go take someone who’s done that journey in a bigger company, because they are earning more than they’ve ever earned. Obviously, in successful pre-IPO companies, everyone’s getting measured on snowflake metrics, and that’s making everyone’s spreadsheet pretty good. There’s a real lack of push from a financial perspective that you sometimes get in market because most companies have used this time to bolster their balance sheets. People aren’t running out of money, most people are sure that their balance sheet is pretty stable right now.
The other side of it is, although someone might say that they’re sitting on a tonne of value from a stock perspective, everyone is rightfully very cynical about other companies’ valuations, even if they don’t have the insight to see that they could apply that to their own. So, if they say, “that’s a really interesting company, but it’s valued at $2 billion, and it appears to be 10 minutes old’, that’s crazy!” How do you know how they’re going to grow into that valuation? There is certainly less movement at a high quality candidate base than we’ve seen for a little while because of that.
Everyone’s pretty emotionally exhausted from the past year, and that’s fair enough. So there’s lots of reasons not to do things right now, all that said, should you wish to pick through the numbers, there are some amazing companies being built right now all over the world. We’ve been talking about the software industry to everyone that would listen for 20 years plus about the world going digital and software eating everything. It’s happened, which is great. We’re at an incredibly exciting moment, I think it’s very difficult for the average person in it to work out what their path is through it because there’s so much noise. It’s tougher for a Series B round founder to go grab a VP from Salesforce than it’s ever been. Supply has never been worse and demand has never been higher.
Outlining your most imperative issue and hiring for that
The companies that have fundamentally been growing through product-led growth, who then get to that point where they have been told by their board, you should start to turn on outbound marketing, and start to think about selling this stuff to bigger companies. We always talked about companies that have gone from sales assisted to land and expand, now they’re starting to do bigger deals. I think finding commercial leaders that understand the full stack of go-to-market motions is really in demand and hard because lots of people are brilliant at volume, or are brilliant at open source and enterprise. But for someone who’s seen that journey in that moment in time, that’s a tough thing to solve because there aren’t that many of them. At the early stage, it’s the person that can reach up and down with the person that is happy to do the first 50 deals, but can also build a team of 50 people. There’s always lots of requests for that. Great early stage sales people tend to be people that solve puzzles and work things out. Those people are often reasonably eccentric, and not necessarily, therefore the best people leaders. So, finding someone that will do your first 50 deals, but then also scale to build out the sales team and build that machinery, are two things that aren’t always that compatible. A lot of founders benefit from deciding which is the most pressing issue and hiring for that, and that is often the advice that we end up giving.
The three key elements to consider when achieving rapid growth
There’s a big question as to whether the CRO role in deals, or actually the CMO role, might be too broad, to get someone who’s really good at all of those things. The intelligence in the funnel of a volume SaaS business is actually at the top of the funnel. It’s all about the sales which basically becomes more of a fulfilment issue and what you want to be is brilliant at segmentation and making sure you’re only pursuing the leads that you know you’re going to close for no money. If you’re looking for a CRO for a volume business, you ultimately probably look for someone who’s great at the top of funnel stuff, and is a great modern performance marketeer.
The challenge there is with marketers is: who’s brilliant at brand, product marketing, and then also funnel management of next year’s number? The CRO role is generally pretty poorly defined, and I think CMO is also generally pretty poorly defined. I wonder if there is a bit of a reorg in that go-to-market function. The companies that grow really quickly tend to just hire people that are brilliant at the constituent parts of the job. If you’re going to grow really quickly, you need:
- Someone who’s brilliant at product marketing
- Someone who’s brilliant at performance marketing
- Someone who’s brilliant at sales
If companies want to grow quickly enough, they probably hire three people to do those three jobs, understanding that actually, the hierarchical piece of that doesn’t really matter anymore than hiring someone to oversee all that.
Founder-led selling and self serve is a counter intuitive journey for many founders
Firstly, there is the cultural lens. If you can find someone who is a great salesperson who is also a brilliant partner to your machine learning, technology founder team, that’s brilliant. But, what is probably more realistic, is founders educating themselves a little bit before they start meeting people for themselves, so that isn’t quite so jarring when they come to hire one themselves. Again, if you’re an early stage business and you’ve raised Series A by doing something profoundly technical, there is a chance that actually you haven’t done as great a job on your storytelling or your product marketing as you think you have. There is a great chance that the people that you’ve sold it to so far are as clever as you, but there’s only 10 of those people and actually your job is to work out how to sell it to people outside that circle. That is initially about storytelling, talking about the problems you solve and how you do it.
Then, a sales leader will take those stories to more people that you can visit. We talk a lot about that kind of moment where you scale beyond founder-led selling, and I think what happens a lot is that a founder will hire a head of sales, and then be really annoyed in six months because the salesperson takes them to every meeting. The founder then thinks, ‘I could just be doing this myself, this is not what I signed up for when hiring a salesperson’. Actually what the salesperson is saying to you is “we don’t have product marketing, and we don’t have sales collateral, so I’m having to take you to every meeting because it’s in your head”. A great early stage head of sales gets it out of the founders head into a story that means something to someone who’s not as clever as the founder. That’s the journey that you’re on between founder-led selling and self-serve, and it’s a counter intuitive journey for a lot of founders to go on. But, I think once they accept that actually their job is to make sales of their incredibly complex idea as simple as humanly possible, those are the ones that tend to go quite quickly.
Every sales leader stands on the shoulders of previous sales leaders
There are so many variables at play. I’ve seen lots of people fail with a series of sales leaders, and then for no apparent reason someone else ends up who’s no better than who was there previously, and they are the person that unlocks the value and is the hero. Go-to-market leaders typically wouldn’t say this, but they have done it on the shoulders of the people that have gone before, because they are often the people that have trained the founder to work with go-to-market. And they’ve not been successful, because they haven’t had time to reap the benefits of those lessons. But, I’ve seen a number of businesses who say, ‘they had one salesperson who was terrible, and then hired this one who is great’, and you see that they’ve literally inherited the value created by the other person and executed it. A lot of successes are serendipitous and timing based.
The second thing is, if that’s not working or you’re just not getting what you want out of someone, as actually they have just run their course. They might have done a couple of years of really good work, because they’re a great salesperson, but they’re not scaling as a sales leader. That’s just okay, that just means they’ve done such a good job, but they’re no longer the right person to lead your go-to-market organisation. Again, I think technical founders find it very easy to get the idea that their founding CTO might not be the best engineering leader when they get to 100 people, and sales is the same around your various kinds of revenue gates, where different skills come into play.
If you’re scaling quickly enough, you may well need to change out your sales leadership. I had a good friend who was Global Head of Sales for Duo Security, and he would say that he would hire someone and by the time they got to their 90 Day Review, they would typically be under qualified on CV for the job they will then do, because another layer of management had gone in due to the way they were scaling. So, he hired adaptable, smart, resilient people who didn’t mind the pace of that. I think that if you are an A and B Round founder and your head of sales isn’t working out, just really analyse the reason why. It might be because they’re terrible, lazy or dreadful, but it might well be because they’ve done their job so well, they are no longer right. At that point, try and find a job for them in the business. There are exceptions to these rules, but they are exceptions. In the main, the person that does your first 100k deal is not going to be your head of sales at $100 million. Planning for that and planning openly with them for that, so that they know that you’ll give them the shot is the best way to do it.
If you feel that you’re not getting the level of transparency through pipelines or you’re not getting the right numbers reported up to finance and all those sorts of things, again, if that is your first kind of salesperson, they’re not going to be great at sales ops. Celebrate the superpower of the person, try and surround them with the other stuff they need to do the complete job. But, don’t be surprised if your brilliant bottoms up volume sales leader doesn’t manage to do your $10 million deal!
Make sure you align yourself with your customers for success
A lot of people talk about customer centricity as a sort of laudable thing to do, and I would agree with that. I have seen a number of companies do CS first, interestingly, because they’ve got some customers, and actually being in place early means that you keep those early customers. This is important because they’re the ones most likely to churn, as you don’t really have a product yet. If you are top down after that you hire a salesperson, but if you’re not top down, or you’re community based, you could make a case for hiring a marketing person. Once you’ve got a bunch of happy customers, and you’re a volume SaaS business, what do you do next? Well, you go identify a TAM that feels a little bit like your happy customers, and then you segment them and you go to market? Then you hire some salespeople to fulfil that demand. Very few software companies are obviously that deliberative, they just go hire a bunch of sales people that they then don’t like because they haven’t closed a load of the deals.
Sometimes we see where they hire a salesperson first, as their board is usually saying why don’t you have a salesperson. Then the salesperson comments on how they can’t be successful because they haven’t got any marketing, so they hire someone after that and start thinking about what happens next. Then the founder who has been running around trying to look after the customers gets some help, and they get a CS person that’s done it before. But, I think you really can make a case early on for hiring someone that really looks after and listens to the customers. They’re drilled into the details of those customers; why are they buying? What else do they want? What’s the upsell/cross sell opportunity with those people? Could you build your go-to-market playbook out of product and CS? Probably because the problem with sales and marketing is you start spending money acquiring customers at that point. If you’ve got your unit economics wrong, the more money you spend, the worse it’ll go. Whereas a kind of CSM- product in unison is actually quite an interesting team to go experiment, test with messages and with new products and features, and you’re not spending money.
I’m working with a relatively extraordinary company at the moment who are a developer tools company, and they basically had to have a product person to go alongside their founding team. They then hired a growth, marketing and product person (hybrid is what I would say!). They set up a minimum viable sales team which was a bunch of half a dozen people and an engineer who liked building spreadsheets, and that became their rev ops person, and actually they’ve got to $20 million in six months. I think they’ll get to 60-70 million this year, having not spent $1 on marketing. But what they really focused on is, who are our customers? What do they need to buy? They will now obviously have to build a marketing team and a sales team, but by being small enough to kind of perpetually experiment, they didn’t spend a bunch of time and energy doing the wrong stuff. They really focused on making sure that everything was aligned before they went big.
Is my life changing stock worth more than your life changing stock?
I think we’re in a 12 month old economy, from a valuation perspective, give or take. I’ve heard vaguely optimistic views on this, which is that there’s a lot of VCs who have an awful lot of money still to deploy. This will all continue and everything will just continue to be great. This is the new normal. Right through to people who have actually told me that they’re thinking of selling their most recent funds, and are just going to live on a mountain for two years and coming back when there’s some value. I think for candidates, it’s the same.
I was chatting to a client recently, about a CRO search, from a company perspective they are offering a CRO in the US business, probably a quarter of what would have been standard two years ago, from a percentage perspective. But, if you follow through the growth of their valuation and the growth of their revenue, it’s a 75 to $100 million outcome for the CEO, which is amazingly a standard conversation that is happening around a bunch of these businesses at the moment.
What we’ve talked about is, if there is significant market correction on valuation, making that good. So, going back, expanding the share call, and going back to something akin to what it was and managing their downside against a market correction, which is a crazy thing to even have to talk about doing. But, we’re seeing those conversations with a bunch of companies where they think they can get to these numbers, but to guard against the ‘what happens if everything goes back to being worth, God forbid, 50 times revenue? What happens then?’ Well, the answer is we’ll double your stock. Those are the kinds of conversations that companies are having, and I think the wrong answer is just to say, ‘no, this one continues forever’, because that doesn’t deal with the understandable paranoia with a candidate, which is ‘I’ve got existing networks here, existing relationships here, I’m doing a great job’ and all those sorts of things. Yes, this might be better, but it’s the difference between 30 million and 50 million- both are life changing. Just having an adult conversation that not every single one of these companies might turn into snowflake, I think is probably a good way of, first of all, appearing like a sensible adult, which everyone looks for in a hiring leader. Secondly, it’s a great way of mitigating that risk for them, obviously a hypothetical risk, but it’s a great way of mitigating that risk for them. And you’re going to have to do it to the whole executive team anyway, because if they’re all there on a quarter of what they should be, and all of a sudden things return to normal, they’re all going to be a flight risk unless you make them good.
How has the pandemic changed the roles needed to scale a business?
It will change. I think the Global Head of Sales/CRO role for scaling business, is one of the most physically demanding jobs I’ve ever seen. Actually, very few people do it three or four times because of that, because the quarterly trip to APAC, the quarterly trip to America or the US, depending on where you’re based, just wears people out. I’d be surprised if in the near term, it returns to that kind of travel cadence. I think everyone’s realised that we can do a bunch of stuff on video. I would say I’ve got a lot more flexibility from our clients around where someone can live. Now, if it’s within two or three hours plus or minus timezone then that’ll do, we don’t need them to come to work. I think that’s sensible. What a lot of commercial leaders think is that’s great, but I still need to get to know the founders, I still need to spend that time. For example, if they’re based in Paris, I’m going to have to spend six months in Paris, just to really get under the skin of the business.
I’ve read a bunch of stuff about the years after the Spanish flu and by 1922, it just wasn’t mentioned in any newspaper anywhere at all. We should never underestimate humanity’s ability to forget. I hope for the health and wellbeing of the CROs that I know, that everyone remains reasonable on that stuff. I don’t see any reason why any employee of a company should be spending 200 days a year on a plane. It’s an incredible waste of time and resources. I don’t think we should ever go back to that, but it would surprise me if we did.
Are there any new emerging industries which fascinate you?
We meet an AI or ML company of some description every day of the week. One of the things I’m really interested in, is trying to work out the go-to-market models of those businesses, which are really, really interesting. At one end of the spectrum, I think you’d have a MongoBD or DataRobot go-to-market motion. So very much like, sell what’s on the truck, build coverage, execute, execute, execute. Then, at the other end, you’ve got Palantir, which is fascinating because they have ex-Chief Commercial Officers of Deutsche Bank and the ex MD of UBS in Europe as their salespeople. The reason for that is they don’t believe anyone on their client side is sophisticated enough to operate their technology. Ultimately, they’re an outsourcing company from a model perspective. I am very, very interested to see how a lot of the ML and AI companies think through that stuff, and whether they think there is enough sophistication on the client side to actually drive the value out of what they built for them.
The other area I really like is applied automation. Obviously, people like UiPath and Automation Anywhere have done an amazing job on the RPA side. I really like that there are companies in Europe, like BRYTER, for example, who have built a low code, no code platform, predominantly for the legal industry. I wonder whether there will be business models where you build a set of products for, let’s say, the legal industry, and then rather than sell them to other law firms, you buy all of the law firms, crunch out all the people and end up with a massive law firm that delivers a bunch of services in a really consistent, high margin way. There are a bunch of industry automation companies, I’ve seen a few people who are starting to at least talk about building those sorts of things. That kind of applied automation and low code could crash the London property market, and that would be great for everybody. Very few industries disrupt themselves. It’s a profoundly exciting space and it will be really interesting to see what happens.