Liz Christo, Partner @ Stage 2 Capital

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This week's episode is of Liz Christo, a partner at Stage 2 Capsule, the fund headed by Mark Roberge, a founding CRO at Hubspot. Before Stage 2, Liz spent 6 years at OpenView, leading the expansion platform, working with the likes of amazing companies like Calendly, Expensify, Datadog. Prior to that, Liz spent a decade as an operator who is the AVP of BD at NetSuite, launching and scaling NetSuite's BDR team to 170 person global organization. This is a real sales focused episode where we explore everything from defining a playbook, tweaking for BLG when doing sales led growth, compensation planning, how to best prospect, and so so much more.

It really is a must listen for any early stage founder to build out an early sales team. All indications, coming in, to the control center at this time indicate we are go. Go. Go.

Lift off. We have a lift off. Liz, really appreciate sitting down. If you can just start with a quick introduction on your side, that'd be great.

Yeah. Of course. I'm an operator turned investor. I'm a part of Stage 2 Capital today.

My background started my career working for Early Stage Startup. Just got acquired into NetSuite and had an 8 and a half year public company run. Ran a bunch of different parts go to market there across sales operations, account management, and then built the top of funnel team, lead gen BDR inside sales, ran a large global org, and then candidly probably burned out at the end and was covering all of the time zones from Boston and had a ton of travel, and it was time for something new and made the jump into venture.

So I joined OpenView Venture Partners in 2016, was there as a GP for about six and a half years. Got to work with some incredible companies and partners, Calendly, Expensify, Datadog, a lot of ones people know. It was blast. When I left OpenView, I had the opportunity to join stage 2 Capital, which is where I am today.

I invest in b to b software companies at The Seed and Siri Bay, and there's a couple of things that are unique about us. We've got a pod model, meaning 2 partners work together on every deal. We raise money in addition to institutional investors from individual LPs. We have now over 600 CROs, CMOs, heads of sales, operations enablement, all these go to market experts that can lean in and help with our portfolio, and that's also in a nutshell.

Very interesting indeed. We wanna talk about moments. Right? Jack's brother also shared that he was always curious about how you ran sales at NetSuite with being a woman and also being at a company that had a lot of men.

How was that experience in general? Yeah. So my role at NetSuite was it's a sort of an interesting path. I started working for them in tech support.

So I was based in Boston and doing support on one of the acquired products and ended up shifting from that into sales operations. And so when OpenAir got acquired by NetSuite, there was one of the sales leaders, Jeff Honeycomb, who was looking for somebody to work with him on sales operations. So my hand up was like, yeah, I'll try it. And I had this just amazing mentor in both him and then a couple of other folks on the team, Brian Martin and Paul, took me under their wing and helped me get up to speed.

So I started in the sales operations capacity. Leading up to that, all of the renewal function had been done out of the Philippines. And so we had this really, like, large team of folks that was processing certainly transactional renewals. And we decided we wanted to drive, like, an upsell engine and orient more towards relationships.

And so we pulled a bunch of that to the US and hired some account managers to try to drive, like, pretty substantial upsell into the customer base. And so the quota was all around, like, growth. That was my first foray into sales management, and it was an awesome path. When I look back at that time, there's a couple of things we did different that I think really stood out.

We went out and hired folks that were not traditional sellers. So we tried to hire people who had really strong domain expertise and could actually connect with the customer and help with product adoption, meaning, like, they learned the product and could go in and be an expert with the customer and actually figure out how they could use it better. And that drove a lot of the upsell motion. I shifted from there into building out that first BDR team.

The company was on fire. We got acquired right after the company went public, and I was with them on a run to about 5,000 employees and a 1,000,000,000 in revenue. So it was a pretty wild ride. Everyone's roots into venture is like nonlinear, right?

There's no straight path. What lessons did you learn that were directly tied to your role as a saleswoman to be seen in the world of venture capital? Yeah. First, my path in to your point of it's nonlinear, kind of in net, some of the partners from OpenView, like, pretty early on and then stayed in touch over the course of probably 4 or 5 years.

Every 3, 4, 6 months, I'd get this pink. I wanna get coffee. I wanna do something. And what they were trying to figure out was we've got this portfolio of companies that are all trying to figure out how to build a BDR team in an outbound motion.

And at the time at NetSuite, I was running a very large scale team, about 200 people, about a 170 frontline BDRs. And they were like, come do that for our portfolio. Figure out how to build that motion across these 30 or 40 companies. And that was my original foray into venture was to be an operating partner, helping companies figure out that go to market motion.

Pretty quickly that changed, but that's what I went there to do. And then to your point of what the parallels are, when people ask me about my role in venture, like, hey, that should be used enterprise sales. I spend my day researching companies, doing cold outreach to CEOs, and figuring out how to crack in, qualifying whether or not they're a fit for us, and then nurturing a small subset of those till the final end state. So when I think about the job, I'm like, it's actually exactly the same.

The only difference is, like, which way the money flows at the end of the process. But it's absolutely an enterprise sales motion. Really interesting. And I pre warned you before this.

It'll be the sales orientated extremely heavy Yeah. Episode, which you're very looking very much looking forward to. Super quickly diving in, what's your take and and how do you define a sales playbook? Like, when the investment founders say and sit down with him or her, what's the kind of first few things that's spring's mind when I say that couple of words?

What we inherit and then there's what we build. And generally, I would say at the earliest stages, it's usually just founder charm and a lot of work on both network and individual deals. And the thing that I think of when I hear playbook is repeatability. And so what are the things that you can pull out of that motion that somebody else can replicate?

And I think often founders think that the motion they're doing, other people should be able to do. And it's pretty rare. Like the way the founder tells the company story or the way they execute a deal is generally not the same way that like an 8 person team of AEs would do it. And so figuring out, again, what are the great things, what's working with customers, what's working and resonating in the story and the value prop, and then figuring out how to make that repeatable.

And then breaking it down into chunks. So I think one of the things that I watch people get stymied by when you say playbook is it just feels like this daunting task of I have to have this perfect beautiful playbook. And, really, like, when I say playbook, I'm like, get a Google doc open and write down what's your prospecting sequence? Like, how do you break into accounts?

What do you do during discovery? What are the critical things you have to learn? What do you do during a demo? What's the basic outline of what you need to cover?

What is your sales process start to finish? And so if you break it into these chunks and you think of it as you're going to build a little guide of what has worked to date, and then just think of that as a living document that you can iterate on. That's what I want people to start with when I say playbook. I feel like it should just be a simple get started and allow somebody to come up to speed fast when they join the company.

Who designs it? Is it usually the founder? The first playbook is generally, like, a team effort across a couple of people. I don't think anybody really tries to build one until they have at least 1 or 2 go to market folks in seat.

And I leave that really broad because that first shirt, like, 1 or 2 go to market hires are generally, like, generalists touching a lot of things. They're doing a little bit of lead gen. They're running some deal processes. They might be working post sale and helping with implementation.

So they tend to be a generalist, and it starts with just, like, putting pen to paper on what they're doing. So I think it's usually, like, that first go to market hire or maybe a collaboration effort between the first few and the founder. And then I think the up leveling starts. If you're growing and you go from 2 to 10 AEs, the sales playbook you need for 10 looks a little different.

And so it starts to become more professionalized over time when you bring in your first sales leader, whether that's a director or VP, it doesn't really matter. I think, generally, that person has a view of, hey, what's the sales methodology we're going to use? How do we bring this sort of like up to par with what we want going forward in the next stage of growth? Founder led sales, obviously, by default is the most popular strategy, especially in the early days.

But let's say, fast forward's revenue generation, like, revenue is increasing across Yep. Sales motion. Like, while the kind of short telltale signs almost in a way that founders need to bring in their 1st sales hire? Is it when they're dedicating too much time to just our initial prospecting call or when they don't have capacity to perform other functions?

What would what do you typically advise? There are so many ways to come at this challenge of like, when is the right time? I think the biggest advice would be like, don't do it too early. You wanna have that close connection to early customers and sell that early revenue yourself.

But at some point, I think there's 2 ways to come at this. The first is just like thinking about your own capacity. And then when my channels are generally working many insane hours, they are handling a whole bunch of different things. And so there's this exercise that I've encouraged people to do, and we call it like the post it note exercise, but Write down every single thing you do in a week or a month.

Take those on individual post it notes and group them by, like, types of activities. And then think about what are the things that only you can do as a founder and what are the things that somebody else could do. And one of the first ones that tends to come up is either some form of, like, lead generation where you're sending collateral prospecting messages or some form of, like, customer onboarding and support. And so that tends to be the 1st GTM role that gets hired is just take this group of work that, like, we think somebody else can handle off the founder's plate.

So capacity of founder, I think, is the first one. The other way to think about it is actually to look more quantitatively at what the customers are doing. So one, you wanna have your customers showing consistent signs of usage. So are they using the product in similar ways?

Is there some consistency in value prop that you think you can sell and talk about with the next customer? If you have 10 customers and they're all using you, like, completely bespoke, it's very hard to tell a sales rep to go sell the next one. So looking for that repeatability. And then also on the demand gen front, depending on the motion of whether you are more self serve, more enterprise, this looks very different.

But if you're feeling a pull on demand and there is, like, a consistency in lead flow and more leads coming in, that's a really good signal that there is, like, demand in the market and a time to bring in a seller. If you're sitting here with no demand and you're like, oh, I'm just gonna hire 3 sales reps, and that will get my go to market engine going, I can promise you it won't. Maybe I can add, one here. In terms of what I find very challenging is you speak to founders, and they're trying to do the PLG motion or an enterprise motion at the same time.

Founders can't do both. Right? So I mean, maybe you can share a few things on that side. Am I wrong, or is there some founders that can do both in your opinion?

I think you can do both, but I think it tends to come at a particular point in the company, and starting with both is near impossible. I think you just have to pick emotion out the gates. The reason for that is you are very resource constrained, and you wanna do something really well. And by dividing those resources, it's very hard to decide where to spend time.

When I think about the product led growth motion, there's a lot of qualifiers of, does it make sense to pursue this at all? But let's assume that it does. It's a slower growth path, meaning you invest a lot in the early days, and then you hope you see the spike in growth. But you have to be very consistent and dedicated and quantitatively driven and analyzing every part of that funnel.

If you have a lot of people coming to your website, then you're thinking about how do you increase the number of clicks? How do you increase the number of people getting into your trial or freemium motion? In that motion, what are the things you are doing to get somebody to their moment, to get to the paywall, to actually convert? All of those things require just a really concentrated and consistent effort.

If at the same time, you're out there pursuing tens of 1,000 of dollars or 100 of 1,000 of dollar deals, one deal in enterprise is gonna get you this moment of, like, a dopamine hit. You're gonna be like, oh my god. Yeah. We've got one customer and they're a 100 k.

We did all this work for 4 months, and we don't have any of those over here. And it just becomes this thing you seek and chase, which means you pull resources away from your product led motion. And so I think you need to make a decision early on. And I think the obviously I work mostly on B2B, so I'm think coming at it from that context that are much more prone to that motion.

And you think about some of the classic examples, like a Slack or a Calendly or a Zoom. There is a reason product led works. There are low cost entry points. Like an individual can make a decision.

There is like inherent virality because they need to engage with someone else. If we're talking about enterprise grade software that requires a rip and replace or hardware or a deployment cycle. One individual employee is not gonna make that decision. There is some tipping point where, like, you can layer enterprise sales into product led, and it works really well and you should.

But if you go too early, I think it's just a distraction. You mentioned kind of premium as almost like an indexing term along with product like growth. But with PLG, like how much does the pricing has changed? Let's say for instance, you're coming down from a sales ad motion, switching over to PLG.

What worries me is the fact that a lot of startups I speak to essentially layer on the enterprise cost base of the sales marketing from enterprise led sales process on the PLG price. And that just didn't really work for me. Do you agree with that? If you don't create almost like packaging around the educational aspect where you referred to before, it takes an extremely quick amount of time to get to that moments.

HubSpot is a really good example of a company that was almost all sales led and flipped to a self serve merchant. And it took years and, like, serious dedication and team to do it. So I just say, I think generally speaking, it's much easier to layer sales into an existing PLG motion. Pricing gets set by a founder kinda like thinking about, so what can I charge for this?

And we're picking a number and then it just stays there for 2 years. And then somebody like in the I know. Right. Like, it's just it's just a total, like, guess.

But amazingly, like, that does tend to be the price for the long time. And then from there, somebody, like, generally in the boardroom is, oh, we could charge more. And, like, just kinda, like, raise prices 20% and see what happens. And so I think this kinda reflection on how frequently can you change price, how do you go about that, how do you experiment with new pricing?

Very different, whether you're product led or enterprise. But it's really important. You can test pricing and should, and it's a huge lever in the growth of a business. Pricing packaging, super critical to your point.

Packaging in particular and thinking about as you release new features and as you build into your product road map, which things can you monetize, which things are just table stakes. Too often, I feel like I see product road maps that don't think about revenue impact. They they're building great features and things customers want, but they're not thinking about the implications of where does that fit into our existing packaging or does it allow us to unlock some new revenue opportunity?

And it's a really good lens to look at product roadmap and to think about, hey, what are things we need to build to shore up our existing packages? And do you that allow us to add incremental value to our customers? What do you think if you have to say the biggest misunderstandings founders fall victim to when they adopt a new enterprise strategy, if you have to share 1 or 2, what do you think the biggest misunderstandings would be in your opinion? Hiring the wrong sales leader is the initial one that comes to mind for me.

I think there's this infatuation with, oh, someone took a company like 0 to €50,000,000 or Picking the the logos ahead of actually the the work they've done sort of thing? Not just that. It's more that the assumption that the person can, a, do it again, or, b, that their relevant experience in the last few years is actually what you need. So, generally, I see this view of founders looking for somebody who had done the whole journey, and there are very few of those people.

They probably made some money. And the idea that they wanna jump back in the weeds of this very early stage startup and all the challenges it presents and get their hands dirty in the weeds again, it's a pretty rare person and scenario where that actually works. And so I try to encourage people to think about what do you need for the next 18 to 24 months? If you're a $2,000,000 business trying to go to, let's say, 6, the person who does that kind of work is very different than the person that ran a 500 person sales team at a 100,000,000 in revenue.

Right? Like, it just they don't look the same. The skill sets and experience are actually really different. And so I think it's focus on what you need for the next 18 to 24 months and be nimble and aware that that person, if they're doing well, has a home in your organization.

Maybe they grow with you. Maybe they get Lair. Maybe they're not the right person for the next stage of growth. And it's okay to be honest about that and find the person who can do the journey from 6 to 20.

Take it in chunks. It's way more important than thinking about the 5 or 7 year plan when you're making the hire. So that to me is, like, the number one thing. And then the second I alluded to before, but I think too often, particularly in an enterprise motion, people assume that if you put bodies in seat, they will generate demand.

And that just simply isn't the case. So going out and hiring 3 or 5 sales reps and giving them each a $1,000,000 quota without leads, without enablement or a plan of how you're gonna generate demand is a very expensive way to build a sales team. And you're going to end up looking at each other like 6 months later going, we're not hitting our quota. And then have this discussion about what are we going to do on the marketing front to support this team we put in seat.

And so don't hire a head of demand. But that's a topic which I really want to cover, which is expenses in general, hiring, and how that feeds into its compensation. They invest in a company. They sell, for argument's sake, legal tech to law firms.

You sit down with them. They've just made us feed the or C suite level hires sales commercially. How do you approach compensation planning to align those in the early days? And how do you make sure that you retain, obviously, with incumbents in the industry willing to probably pay much more in salary, retain that talent, you know, for the long term?

So I teach a class on setting sales compensation as part of our Catalyst program every year. And so we run once a year this go to market accelerator and do a deep dive on a bunch of these topics. And I was just working on the deck for this. And so it's like very top of mind and timely.

That's something people like that hearing will be inside. Sorry. Yeah. No.

It's alright. Ironically, it hasn't changed that much year over year. There's a lot of things that are the same. So I think first, sales compensation plans are not like rinse and repeat across companies.

And I think to our earlier conversation, who you hire matters. If someone walks in and is, this is the comp plan for my last company, put it in place here. Like, that cookie cutter approach shouldn't be how you build a company. You need to start with what are the high level business goals and what are you in trying to incentivize someone to do.

For example, if retention is a key challenge, your direct sales team needs to be tied to the retention number of the business. You can't just incentivize them on bringing in more new business that's gonna churn out the back end. If you're trying to drive faster adoption of a product, don't pay your sales team until the customer goes live. If you are trying to move upmarket, create different commission structures for SMB deals versus midmarket and pay more for the bigger ones.

These are all examples of start with what are you trying to incentivize and then build a comp plan that gets your sales teams aligned with the broader business goals. So that that's number one to make. The second thing is playing out what are the actual unit economics here. And one of the challenges I find is that as you add people to a sales process and as a company grows, you keep adding people to get paid on deals.

When you hire a sales manager and suddenly, 2 people are getting paid on every deal, and then you hire a BDR and you wanna give them a kicker. And then, like, you got a team of 10, and you're like, we really need, like, a solution consultant or an architect that helps with these deals. Suddenly, 4 or 5 people are getting paid. And then you need to look at the entire commission stack.

Who are all the people that get paid on a deal? And is that deal still profitable to the company? Does it make sense with this comp structure? And so I can't give you an answer of what that should be for your business.

If you are selling month to month deals versus a 5 year enterprise contract, the 5 year enterprise contract has a lot more room in commissions because you know that customer is locked in and paying you. So you can incentivize people differently. So that's the second piece. And then the third thing that I think about here is making sure that across the teams, everyone's aligned.

You don't wanna create a scenario of conflict internally. I'll give an example. If you run a pilot process with enterprise customers, who is incentivized to get that customer to convert to full time? And when do you do the handoff for a new business to account management?

Again, there's not a right answer, but you never want your new business and account management reps fighting for who talks to the customer or creating a negative customer experience. I think a lot of these three businesses also like lack the clarity of actually working top down respectively from, like, goal to action as well. So it's always good to reiterate. How long rope wise do you give that individual if it's not working out for a senior hire.

Is it 6? Is it 8 months before you pull the blood in and just say, it's not for us? I think you've know in the 1st 90 days whether or not someone's gonna work. In my experience, you're either seeing really good signals towards and progress towards the goals you want.

And anyone who's not working and you're giving a ton of feedback, it's so rare that 6 9 months in, that suddenly just turns around. I think Yeah. It it may not be that, oh my god, you hit goal in your Q1. But if you're seeing all the activity and signals and you feel good about it, you're probably moving in the right direction.

But I think, you know, you brought up one other thing in there that I didn't touch on, which is the retention of talent and as a startup fighting the war against Google who will pay you products on paper. I feel a lot about this one. I think we come across it a lot. First, I think there is just this self selection thing that occurs.

And if you are talking to an account executive who is talking to Google's enterprise cloud team and startup with 3 employees, there is a question of someone is in the wrong deal, quote, unquote. That AE shouldn't want to do both of those jobs equally. Ignore compensation for a second. People are either set up to do those early days of I want to figure it out and beg, borrow, and steal resources and figure it out on the fly versus I want to fit into a process that is pre established in a team and support.

And some people can do both, but I think it's really rare that you should be looking at both of those jobs at the same time. If you are, I think a really direct conversation should be had about what you're optimizing for. And then I think the second thing that may be more important is, like, within let's just assume people have qualified into, like, startup land generally, and you're, like, competing between an a and b or c route company. OTEs are such an odd thing into our, like, conversation around commission plans.

Somebody saying you can have a 150 k OTE and you can have a 300 k OTE, like, doesn't matter. You gotta figure out how do you actually make money. And I think too often, candidates ignore that. And so the questions I would encourage a candidate to ask or a, like, team to be talking about in the interview process is, like, how does the commission structure actually work?

How many of the people in seat are actually making quota today? What does the lead flow look like? What's the likelihood that you hit this plan? What's the gap between the AE's quota and the board plan?

Like and making sure that there is actually an ability to hit that number because who cares if you have a 300 k OTE if everybody on the team is doing 50% of their quota? I'd rather have a 100 and 50 k OTE where everybody is doing a 120% and you're in accelerators. So there's this trade off that occurs, and I think if you actually can back it up with some data and talk about what your goals and your philosophy around compensation is, it's really helpful for a candidate and for that retention conversation.

Yeah. A 100%. I've spoke to the founder of Zenefits and he said, essentially when he's hiring the VP level commercial role, he sets almost like a sliding scale. So you'll have the actual base level salary that you can just survive on.

I you pay the mortgage, pay the bills, pay the kids, cool fees, whatever. And looked after that. And then like, however much equity and compensation you want, the other side, it goes up and down in conjunction. So I thought it was quite an interesting way to think about compensation.

Like the more risk you're willing to assume, the higher potential opportunity there is? Yeah, exactly. It's great. How do the best sales reps approach sales prospects today in your opinion?

If I think about the best sellers I see, regardless of company, there are a couple of themes that stand out. I think the first is owning your own number. And what I mean by that is there are a set of reps who are just paranoid about my life, and they look at their pipeline just constantly as I don't have enough. I can't succeed in role.

So they walk into a role and they think like, alright, I wanna get to you 4 x coverage or whatever number they have set for themselves, and they build a plan of how to get there without thinking about anyone else. It is, I am gonna do this work. I am going to prospect. I am gonna build a target account list.

I am gonna map that organization, figure out what's important to them, who the people are. I'm gonna build a strategy and I am gonna dedicate time on my calendar to doing this consistently. And then like layer 2 of that is like, alright, how am I gonna use the resources that are available at this company? Whether that is a BDR, a partner channel, a marketing team, events.

The pipeline is mine. That mentality is I don't think you can create it. I think it's, like, inherent to a person. There are the woman that worked for me, like, many years ago, and she used to get, like, kind of upset every time she closed a deal, and I couldn't figure out what was going on.

And we, like, finally unpacked it. And she closed this, like, massive deal and did a 150% of her number in q 2. And she I have a huge hole in my pipeline, and I have no way to get coverage in q straight. And she looked at winning a deal as now there is a hole in my pipeline.

Right? That 200 k deal is gone, and I gotta go figure out how to back. Great reps are thinking, like, 2 3 quarters ahead of I gotta go get coverage. So I don't know.

That's probably, like, the one trait that I think about the most. And I think if you're if you're seeing people on your team who are sitting there going, I'm not getting enough leads from marketing, that's a signal of a mindset shift problem that needs to occur. Yeah. It's awesome that marketing can feed you enough leads.

But it's pretty rare in this day and age. It's just like, a rep just gets to sit down and close the leads that come to them. And look, like the reality of the job is you are a very highly compensated person for a reason. You are assuming the risk of go do some of that work yourself.

Is cold outbound debt in your opinion? Like, obviously, especially like from an investor's perspective, the amount of AI type sales agent software has has been pitched to me over at at least I trialed for more than Yeah. 1,000, I would say. Like, how would you advise Portcay's on approaching cold outbound resource attributed resource?

How does that work in your particular mind? Maybe an incredibly unpopular opinion in this moment of Gen AI hype, but I think all we're doing all we're doing is making bad outbound easier to do, which has been a trend for the last, I'm gonna go with, 10 years. So we started by having tools like SalesLoft and Outreach and Cadence tools that allow people to just do, like, mass emailing. We've layered in, like, trigger based tools like a 6th Sense, and I'm talking about the older technology.

Right? But, like, when you adopted, it was really cool that you could track all these things. Like, you look you're like website visitors, and now we're layering in, like, smarter personalization. But if I think about true enterprise outbound, none of these tools can do it for you.

The critical part is being, like, hyper thoughtful in your message, consistent in your messaging, consistent in your touch points, multithreading across many people, and just being relentless and creative. So whether that is, like, finding out if an exec is gonna be at an event and flying to the event, saying, hey, we're gonna be in town on Tuesday. Can we swing by your office? There are obviously very variable things you can do depending on both your cost of sale and the ACD of the the deal you could potentially close.

But I think cold outbound has been around forever. It's becoming less effective because of all the noise. And the sheer volume of outbound prospecting that's occurring means that, yeah, on a percentage basis, it's less effective. But when I look at individuals and individual companies who are doing it really well and, like, truly thoughtfully thinking about not their TAM or Sam, but their SOM, who are the few people you are going after right now and building a strategy to go after them, it's still really working.

And it works different in different industries right now. If you're going after restaurants, you probably have a very different approach than if you're going after large enterprise, Fortune 500 deals. And the last thing I'll say, which, again, may be generally unpopular, the phone still works. Pick up the phone.

And no one does it anymore. It's astounding. We've had a lot of portfolio companies that have had to say, knows customers on the basis that essentially is perhaps not a right fit, both invertical, but also maybe like the expansion potential in that particular contract. What are the best reasons why reps should say no to customers?

Often PayPay founders didn't realize that it can fundamentally hurt the business by taking on a customer. But then there's the large dooming ACB that's attached to that decision, etcetera. Why would you not sign a new customer? I actually think it's the most important thing a rep can do.

And so at that any level, I think there is this very high level conversation that needs to be had at the executive team or with the go to market team. What are the deals we are willing to sell, and what are the hard red lines that we will not cross? And those are different by company, but I think of we do this exercise of portfolio companies and building red, yellow, green for your ICP. So if you start with green, green is what's the sweet spot?

What are the deals we wanna close where we're gonna spend all of our time on outbound? Yellow is if they come to us, we'll probably sell them, but we're not gonna spend time targeting. And red is even if they come inbound, we shouldn't close this deal. To give you an example, like, I'm working with a company right now who started in mid market and moved up to enterprise, but they're getting some interest from, like, Fortune 10 companies.

And there is, like, a natural pull to say, of course, we should go spend time on that. But as a really early stage company with sub 10 employees, like, that could be a 24 month sales cycle that sucks 2 entire FTEs out of you. And And and and those sort of products might not be ready, so you'll have to build out a high proportion of that. Right?

Exactly. And then you're taking, like, product roadmap time from all the things you want to do from your core customers, and you don't know if you'll ever get another one of those. So I think those, like, that green, yellow, red exercise is a really good one that has to happen at the senior levels. Just what are the lines we won't cross?

And then be honest with yourself and actually follow through. And I think that then needs to trickle down and happen at every level. I got a different company right now who is pouring into, like, mid market. And one of the things we've realized is, like, there is a threshold of the number of units that somebody can sell.

And we're really good in, like, under 50, and we're like, okay, in 50 to 75. But when we hit a 100 units, like, the product isn't ready to your point, Jack. And so stop spending time prospecting the ones that are a 150 because even if you get in, we don't wanna close the deal. And so there's this, like, really honest conversation that has to happen.

I'll give just, like, one other example on the opposite end of the spectrum. This was founder led sales and a red prospect kept coming inbound. And the founder got on the phone and said, hey. Like, we are not gonna sell you our software for these reasons.

This is what we are building and what is it it is intended to do. This is the use case you have described to me, and we are not gonna support it. And the cut like, the prospect sat with that and came back 2 weeks later and said, we heard you. We're not gonna ask for enhancement requests.

Like, this solves a gap we have today, and we want to use your software. And it's a really interesting trade off where because they did this, like, upfront contract of we are not gonna support it, like, it's a deal they can sell, but they were really honest. They weren't just, like, pushing forward with trying to use it. So I know I think we we hit the kind of key points to me, which is if it's not in your ICP, don't close the deal.

Like having revenue likely to churn on the back end just doesn't make sense. Super quickly, because we're running out of time, kind of 2 or 3 main piece of advice that you would give reps in terms of qualifying in whether a customer is eligible for a discount and like how much discounts I should give. Yeah. This is just a fundamental conversation that needs to happen at the executive levels, and I think you need to find out how to explain work for us how discounting works at your company.

I've watched companies who say our price is our price, and we do not discount. And that is a really clean, easy way to hold a line because as soon as you give one discount, it's always commendable. At the other end of the spectrum, discounting is a natural part of an entire sales process. In my mind, discounting is like a bid where you have to get something in return.

And so if you can make the list of your gives and gets, it becomes a lot easier. You need to get all of the negotiating options on the table. For example, if somebody is saying, I'm looking for a 20% discount on this, then the question is, will you sign this nook? Will you pay in instead of quarterly payment terms, will you pay a 100% upfront?

Can we move you from net 60 to net 30? What are the things that you can get for a time for that discount? And then I think there's also an aspect of just, like, at some point, you have to hold the line and know that you can't go further. That generally comes from what is the actual deal structure and the margins on the table?

How low can we go? And there probably should be some sort of minimums in place and approval process for discounting. I do discounting as a pretty natural part of the process, but I don't think it should be delegated until each individual rep gets to make their own choice on it. I think you have to have a structure at the company level for how you make those decisions.

If you talk about, like, cross function relationships between, like, sales and product product marketing, what do you think is the most important area in your opinion? Compensation? Yeah. No.

Truly, like, marketing often is qual like, comped on creating leads, and the sales team needs quality, not volume. And so I think one of the key challenges that happens in marketing and sales is making sure that they're actually aligned in the revenue goals of the company. If marketing is told you have to create a 100 leads and the sales team has said you have to close a $1,000,000 in business, you could create a 100 leads, but don't convert to revenue. Marketing needs to be aligned to sales and the ultimate end end goals of the company.

So to me, that's the most critical thing. If your incentives are aligned, then I think there is this just transparency and goal setting of what are the important things we're working on and what are we saying no to in order to get them done. I think sales can create a lot of go fetch missions. Like, we've got this big deal, and we're all working on it, and we need all these resources.

And if you don't have strong leadership, like, really qualifying and figuring out, is this something that we wanna spend time on, it can be this total distraction for marketing of getting pulled into one off deals instead of thinking about long term, what are we trying to accomplish? So, yeah, I think it's first the alignment on the comp front and then leadership actually agreeing to what the priorities are and where we're willing to give. And so most of the functions have to teach each of it.

Right? Like, CMOs need to be good sellers, and CROs need to be good marketers in the modern Jack, I just gave you an example of a CMO who took a personal quota. So he was like, I wanna close the deal because I wanna know what it looks like. And he, like, said this cheaply.

And the CRO was like, sure. But if you're gonna take leads, like, you have to carry a quota. Like, you can't just play around in here. And so he took on, like, a small quota.

It was, like, 25% of one of the reps. And he was like, I'm just gonna do this for 6 months to understand, like, the plight of our sellers. I thought that was awesome. That's the kind of, like, do you give more ropes to that individual as per our point before.

Right? And it's customer success really quickly. Like, how bought in are you on customer success? Like, how should that be structured on an org chart for you?

Like, how big should that be as a proportion of the overall sales team? What should they be responsible for? Well, it's a really good one. That's what we talk about a lot.

Obviously, I'm bought in on the concept of customer success. I think god, I probably shouldn't swear, but it's like the most master they had title in, like, all of software right now. And if you wind back till even 15 years ago, we had account management, which was a commercial relationship to grow an account. And we had, like, professional services and implementation that was responsible for getting a customer live and delivering services.

And along the way, we kinda like decided somehow that customer success should just be the amalgamation of all those things, and they should do implementation, and they should provide support, and they should maybe drive upsell or send leads to sales. And it's so many responsibilities that can land on one person's plate. But then what's the skills that you're looking for? Are you looking for somebody who can actually, like, be in the product and drive implementation?

Are you looking for a seller who can grow the account? And so I think, like, my real challenge here is this role has become, like, a catchall of too many things. And, generally, like, fine in early days, but, like, thinking about that specialization and what skill sets do you need for each part of this process? And then, again, like, how do you tie that into the broader buyer journey is something that really needs to happen.

So for me, when I think about customer success, obviously, again, it depends on the sales process. But generally, they own some part of implementation post sale, getting people to the point of adoption and activation, and then they own some component of a long term relationship. And the question I always have is, are they quota carrying or not? What is the key metric for CS?

And either it's gonna be something around customer satisfaction, NPS, like that side of things, or it's going to be a revenue target. I tend to lean towards the revenue target side of CS with the idea that, like Tungible. Right? And it's easier to measure.

Right? It is. And, honestly, if you're doing the right things in CS, naturally, those accounts should have revenue output. And I think tying people to that is a better way to get the outcome.

I I do think you should separate out implementation from that team. I think the sales different. So one last question. If you had a new investment and you're sitting down with the founder and discussing targets, how would you approach forecasting?

What works and what does not work from your experience dealing with many B2B companies? Yeah. I always start with the bottoms up model. What's the history?

Give me the last 6 months of data. How many leads did you produce? How many opportunities? How many closed won deals?

What was the ACB? What was the cost of those deals to deliver? How many FTEs were in seat and break that down by individual? And just assume nothing changes.

What can we do in the next 6 months? What can we do if we hire 1, 2, 4 people, and do we have the demand to match that? That's a bottoms up model. From there, you can layer in assumptions.

What if we could add 10% more leads? What if we could increase the close rate by 5%? Now all of those assumptions are, like, really good on paper, but when you layer them together, people often assume they're gonna get better in every area. You're not.

It's just not how a company works. And so we need to think about what are the reasonable assumptions and then what are the things we're tracking to see if we're on track. The big mistake there to me, Rich, is, like, most mostly, people do top down planning and are like, alright. We did 2,000,000 last year.

We wanna hit 8 this year. And, again, it's like the just like finger in the wind. Like, alright, sales leader. Hit 8.

And nobody's thinking about what does the cost of that look like? What is the demand you need? And, like, how would we actually bridge the gap to get there? Should I start with bottoms up and then layer in some some basic assumptions on that and track them really closely over time?

So that to me is, like, how you build the plan. And then forecasting is, like, minimum monthly check-in and hopefully weekly. Like, how are we tracking to this number on both my cost side and the, like, delivery of its side? So monthly at the like, in terms of over a period of time and then moving on to a a weekly concept?

I think it depends on the company. So, like, in an enterprise deal process, there's probably not a lot to talk about week to week. If you're talking about a very highly transactional one, a weekly forecast, weekly numbers. So it's more like the context of the company, but I wouldn't let anyone prefer to forecast further apart than monthly.

Maybe we can do a quick fire now. So just 1, 2, 3 questions. One thing that you would change about venture today, would you say? Transparency.

I think we all chase a lot of the same deals and aren't clear with the founder of whether or not we're gonna do them and waste a lot of time. What is something contrarian you believe maybe in the field or a vertical or fundamentally across what you do that you fundamentally believe that not many other people do? Venture, I think right now is viewed as, like, you have to get one outlier, big winner in every fund, and that's how you make money. If you had 18 deals in a fund and one winner, like, 17 other ones can go to 0.

What if instead you got 15 of them to be middle of the road outcomes and a couple that did pretty well? I think there's actually some different ways to look at fund construction that if we thought just longer and harder about landing the plane and not letting companies go to 0, you could have a, kinda much better outcome for many people. It's been amazing to have you on. So I really appreciate your time.

Thank you so much, Adam. Yeah. Thank you. Wow.

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