Andy Stinnes
As general partner in a classic Series A venture capital firm, I have the pleasure of regularly speaking to cloud software company founders. At this early stage, a lot of company building has yet to be done, which includes the development of a professional sales team.
Let me set the scene: The founders have been at it for about two years, built an early product and won their first cohort of customers; ARR is $200,000-$500,000. The early customers were roped in by the founders, and the initial market was validated in the process. They just recently hired a first BDR to generate more leads.
Now, the founders want to hire their first sales professional and have a lot of questions. Hire a leader and build top-down, or start with an individual rep? Which kind of profile and how much experience should they have? Will hiring a few reps right away help them grow faster?
Founders often come from successful cloud companies and have seen what an efficient sales machine looks like at the growth stage. But that is very different from a company just starting its sales engine, so the first discussion I usually have is about early versus later-stage sales.
Mind the stage
Selling an early product in a nascent market to an unclear set of customers is like being dropped into a jungle with nothing but a knife. Where is north? Where is water, food and shelter? Who is friend or foe?
It takes a special type of sales professional to be successful at this stage — a highly intelligent, self-directed, curious person who is consultative with prospects. They must be comfortable with a lack of clarity, resources and direction.
Founders often proudly share the profile of a hot-shot sales candidate who is a top performer and exceeded quota three years running at a billion-dollar cloud unicorn. They are certainly impressive, but likely not the right person.
Founders need someone who gets the big picture, understands the business domain, loves the technology, and, crucially, asks a lot of questions. They need a salesperson with an inquisitive mind who appropriately challenges the prospects, and learns and adapts quickly. This person should also be creative enough to envision how the technology can deliver value in new and different ways.
In some ways, this person is both a sales engineer and a sales rep at the same time. Often, they will need to identify and navigate to new value propositions for new types of customers.
Internal communication plays a pivotal role here, and it’s important to be in sync with the team, share newly found requirements, and help to shape the product and morph the marketing message. Make sure your early-stage sales team shines here and enjoys the process.
By contrast, the situation is much different in later-stage companies, and, therefore, so are the profile and skills required. The sales motion is clear and well defined, and the problem, value proposition, the target market segments and ICPs, qualifications, buyer behavior, competition, differentiation and pricing — all these elements are understood and known.
The required sales profile is more transactionally oriented, and this person is great at running and closing a repeatable sales process based on prescriptive “sales playbooks” and a mature library of sales assets.
Do you need a general or a soldier?
The other big question is whether to hire a sales leader and allow them to build their team, or start with one or more contributor sales account executives (AEs), with the founders continuing to lead sales as a function.
This sounds like one of those “it depends” questions, and it is. Several factors like nature of market, problem, solution, ACV and deal volume will affect what you do here. Mostly, though, it depends on the founders’ experience — if one of the founders has a professional sales background and has built and run cloud sales teams before.
Non-sales founders can be very gifted natural sellers: They know the domain, are full of energy and conviction, can be very credible and attract early adopters. But when building a small team, they often struggle to replicate their own success and get frustrated; they may see an issue in the reps they hired, not in their own ability to build a sales process and organization.
There is another factor to consider: There should be a transition from founder-led selling to a sales-led process after the Series A is raised and before the goal posts for a successful Series B are reached. This is not yet about scaling the company; it is about proving that a skilled professional sales team can successfully attract and close customers, and make quota. That is something Series B investors look for.
Having a founder lead the sales function, even a gifted one, can impair delivering that proof. It takes extra discipline to trust the newly hired sales team and let them lead and truly own the process. An externally hired sales VP with appropriate early-stage skills can really help here.
How many, how soon?
From here, the conversation typically turns to team size. Founders are bullish and want to grow fast, so at this point they plan to hire three, four, five or six reps in quick succession. Is that the right thing to do?
My advice is to be mindful of a few aspects. First, it is generally a good idea to hire in pairs. A single salesperson can get lonely, and friendly competition between reps is good. Training efforts are more efficient, and they will learn from each other. Risk is also spread more in case of attrition.
With at least two sales reps, it’s easier to compare and discern if it is a product/market or a sales team problem. If one performs brilliantly and the other delivers zeroes, it’s more likely the latter. If both fail, it’s probably the former.
Second, consider the type of sale: Is it a fast-cycle, small-ACV, inside sales model? Then adding a handful of reps within the first year can make good sense. If, on the other hand, it’s a complex, six-figure enterprise solution in a long sales cycle, be careful with going beyond the first two AEs. They are probably enough for some time.
Third, think about when to add sales resources after the initial hires. One mistake we see most often is doing it too soon. Look at some key metrics: Are the existing reps making quota or at least getting close? Is the lead flow growing and tapping out the team? What is the Magic Number? Is it at least better than 50%?
There is a lot to consider when building an early-stage sales organization. It helps if you’ve done it a few times, and most founders have not. It’s time to assemble a strong team of advisers who have, beginning with your investors.
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