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Demystifying the conversations we're already here at RRE and with our portfolio companies. In each episode, your hosts, Will Porteous, Raju Rishi, and Jason Black will dive deeply into topics that are shaping the future, from satellite technology to digital health, to venture investing, and much more.
Raju: All right, what’s the zaniest thing you’ve seen, you’ve done, or seen someone else do in order to close a deal?
Jason: I guarantee Chase [Feiger 00:00:07] did it.
Raju: [laugh].
Will: [laugh].
Jason: I guarantee it. I mean—
Raju: He probably did.
Jason: —that man can sell. He’s like hanging out at, like, people’s houses, meeting their children.
Raju: No, no, I think he sent a picture of his feet to one of the prospects. Like, he was just trying to get feedback on, like, some—there was some kind of, like, rash or something.
Jason: It’s some medical thing, and—yeah.
Raju: Yeah. But it created a rapport.
Jason: It created a [laugh] rapport.
Raju: [laugh].
Jason: [laugh].
Will: Welcome to RRE POV—
Raju: —a show in which we record the conversations we’re already having amongst ourselves—
Jason: —our entrepreneurs, and industry leaders for you to listen in on.
Will: Welcome back to our RRE POV. It’s great to have you with us. Our topic today is scaling the direct sales organization. You know, in our investing life, we’re privileged enough to back really innovative companies, incredible entrepreneurs, but the truth is, nothing happens until somebody sells something. It’s that moment at which a new organization becomes a business.
And throughout my 25 years in the investing world, this exercise of building the sales organization, learning how to sell your product is often the most complicated and fraught part of the company-building journey. And we’re going to start to unpack this topic today, so I want to kick things off with a question really to my partner, Raju. Raju, before you were an investor, you were a founder and CEO of multiple companies. I’d love to hear—and I know our audience would love to hear—your overarching thoughts on this topic.
Raju: I can get into this for [laugh] decades. I actually love sales, actually, initial sales, and you know, just the notion of where it heads over time. But I guess, you know, the first place I’d start with this topic—because I think there’s a lot of places we can go with this—is, is your sales process aligned with your product and your business model? And I think one of the things that people fail to do is they just say, “Okay, I got to hire a salesperson or I’ve got to hire a sales team. We’ve got a great product,” and they’re not thoughtful about who they’re hiring, and what the methodology, and process, and what they’re expecting from the sales organization.
So, the first lesson I’ve learned is that there’s different kinds of sales hunters. You know, I call them elephant hunters, versus deer hunters, versus rabbit hunters. You know, and if you’re a lover of land animals, but it’s fine for you to eat sea creatures, maybe it’s whale fishing, blue fishing, and flounder fishing. So, I’m trying to appease all the—
Jason: Yeah minnows.
Raju: —land lovers.
Jason: Let’s get down there. Yeah.
Raju: Yeah, exactly. So just, like, to quantify it a little bit, I’m going to stick with the land animals because it’s easier [laugh].
Jason: We’ll figure out a vegan scale as well.
Raju: Vegan, yeah. Yeah, I don’t know, maybe they’re just, like—I don’t even know if people like chopping down trees versus sequoias versus in, you know, pine trees versus, like, daisies.
Will: Yeah. There’s like really big squash in the middle there somewhere.
Jason: There at least, you know, we can grow them back. The sequoias take a little bit longer.
Raju: Yeah, it’s true. It’s true.
Jason: To both chop down and grow back. But.
Raju: Yeah. So elephants, you know, it’s huge revenue—typically—long sales cycles, lots of customization. So, if you’re selling a software solution to you know, sort of, Amazon or Microsoft or Comcast, you know, you’re expecting a big contract, it typically takes a while, and a lot of customization. Deer are sort of mid-sized revenue, mid-sized sales cycles, and modest customization. And rabbit, really kind of small revenue, quick sales cycles, and no customization.
And where the problem lies, is, companies sometimes misaligned their product or business model with their sales targets. So, you build a heavy, expensive sales team and they’re chasing rabbits. And the ramification of that is, even an individual deal like a rabbit takes energy and effort, and there’s some inherent upfront effort that gets taken on, and you know, you wind up having some sales cycle that doesn’t align with, you know, the amount of revenue that you need per product. Or, you know, your product is really hard to customize, and your sales team is targeting whales. And the ramification of that is, you now have to put a lot of Band-Aids on your product.
So, every time you close a deal, you’re doing a different customization, and you’ve got a fork in your code, and you know, sort of, you got to maintain that over time, and your product really wasn’t designed to do that. Or you don’t even have a services organization, you know? You built this product, but you weren’t anticipating that you’d have to do a lot of customization, and you have a massive problem where everybody wants a particular feature, and you’re promising a lot on the roadmap, and whatever. So, that’s one piece. And then the second thing is where a problem lies is the [animals 00:05:29] have mutated in the wrong way [laugh]. So, you’re needing to do a lot of customizations for rabbits. So, it’s like a rabbit-whale or a rabbit-elephant. What do you call that? What is that, Jason?
Jason: Or a Jackalope?
Raju: What is that called?
Jason: Well, there’s like that, the Jackalope which is, like, the rabbit with the horns?
Raju: Kind of right. That’s like a rabbit deer. But a rabbit elephant—
Will: That’s a very ambitious rabbit that wants to be a bigger creature.
Raju: Yeah.
Jason: There’s probably a horror movie of, like, mixing animals together.
Raju: Yeah. So, you know, the second thing is, like, rabbits are taking as long to close as deers or whales. And so, you know, you’ve got this misalignment. And so typically, when I work with a sales team in one of my portfolio companies, I’ll say let’s just start with deer. They look a lot the same, very similar look. There’s a lot of meat around the bones. It’s not as much as an elephant, but it’s more than a rabbit, and hopefully, the sales cycles are modest, and you don’t require a lot of customization. So, you know, I mean, I’ve seen that go awry.
Jason: It’s interesting, people would be kind of surprised to hear the word customization come up. Are you more referencing the early days of sales when your product is still maturing, or at scale? Because I think it would be helpful to kind of hear your experience: does Datadog do a lot of customization when they’re selling into Walmart, as an example, right? And so, you know, the scale of customization can be different based on the industry. Healthcare will require quite a bit more customization because, you know, the underlying data infrastructure is quite a bit different, versus, like, a CRM. Salesforce still does customizations. Should a small company do customizations, and how should they be thinking about that, I think would be an interesting topic for you to jump into.
Raju: Yeah, I mean ideally, you know, you’re selling what’s on the shelf as a sales organization, and you’re not promising new features. And I know, Will, you have a thought on this as well, but I’ll give my initial thought, and I’ll pass the buck over to you. I think you want to talk more about the product having the ability to do some—have capability to, you know, sort of do some permutations, you know, and templatized customizations, things like that, as opposed to just okay, you know, somebody needs this API; we don’t even have it, we never intended to have it, and we’ve got to build it fresh for them. So, early days of companies, you’re just kicking off, you’ve got a deal or two, it’s fine to be customization, you know, focused because you’re still experimenting with where your product-market fit is and where the product sits. And I’m talking about when you’ve got five or ten sales reps in there and everybody’s requiring a new feature, or you know, a new API, or a new sort of slant on this.
I kind of like the notion of the product has flexibility built into it so you can actually, you know, templatize that, and either pick option A or B or C as opposed to, you know, requiring something really custom, which was, you know, customization. So, the problem with that is, you know, you’ve got to keep that forever, even if it’s for a single customer because you don’t want churn.
Will: Well, Raju, I think you just put your finger on one of the crucial things in managing an emerging sales team, which is that you got to keep the guardrails on, on the type of deals that people quote and go out and win because the salespeople can go out and quote an elephant-sized deal—on an elephant, in part because it includes a lot of customization—that takes the company off of the roadmap. That early sales operations function, which not a lot of people talk enough about, that discipline of tying what salespeople are bringing into what is actually being built, and how it’s being factored into the financial forecast. Developing that early is really fundamental because otherwise you can really be overextended in terms of your resources in pursuit of deals that aren’t actually fit with your model.
Raju: Yeah. Couldn’t agree more.
Jason: Let’s get even more practical about it. Like, what is the implications of, like, having something misaligned? You are mispricing your product, and doing too much work for too little value. If you were doing customizations for a rabbit where somebody’s swiping their credit card, Datadog is not customizing a brand-new startup. They want their visibility on the back-end and observability into their DevOps.
There’s no way Datadog can, number one, do customizations and justify engineering spend, and number two, then go support that customization over time for somebody swiping their credit card, you know, with a brand-new startup. And so, you know, the implications of doing too much customization—and I think this is where, you know, trying to get into a little bit with the customization is that early days, customization can also be just pulling forward future product roadmap. So there’s, like, kind of a little bit of a, maybe not a misnomer, but just a blend of a couple of terms, and that can be more justifiable. But if you’re doing things that you would never plan to do which takes your product in a new direction, or into a new space that you’re not excited to support, that requires a tremendous amount of conviction and a huge price tag. And frankly, having these whales or elephants, actually paying for NRE—non-recurring engineering—is absolutely justifiable. If you can’t justify—you know, the elephant isn’t willing to spend for that product relative to their overall budget—usually it’s de minimis relative to the, you know, the size of these animals—that says something about their interest in the product just generally, as well.
Raju: Yeah. I agree with Jason. I think the trick here—and you kind of alluded to it—is, if you’re pulling a roadmap feature forward, and there’s enough people with that need because—if it’s an elephant that’s asking for it—like, I need single sign-on, you know, great. I get it. And nobody’s going to sort of disparage that or say you shouldn’t do it.
But if you’re building a proprietary interface to a custom database [laugh] that you now have to support for the rest of your life because Comcast wants it or Microsoft wants it, man, when you try to move this thing into the cloud, you got to support an interface that might be a legacy—you know, it’s like what, FORTRAN, right? Like, code in FORTRAN, right [laugh]? Like, nobody’s going to want to do that now. We’re trying to get rid of that. And that’s where tech debt sits for the rest of your life, and people just don’t understand the ramifications of it.
These are all trade-offs, right? Like, everybody gets excited in a boardroom when you close this behemoth customer, and you get, like, a million dollars ARR or something like that off of them, but you do have to look at the trade-off. And I will tell you, I sit on the boards of multiple companies that have fired customers because we’ve built too much proprietary stuff around a particular customer, and the weight of supporting that long-term was crushing the business. And so, we wound up firing them, and we wound up, you know, just saying, unless you want to pay us, you know, a ton of money on the services side, this doesn’t fit our business model anymore. So, it’s a double-edged sword.
Jason: Absolutely. It’s tough.
Will: That’s actually an incredible moment in the life of a company because it’s clearly the reversion to what are we really good at, and who should we really be selling to? You know, I feel like this example is one of the great expressions of companies putting themselves at risk of indigestion when they’re selling far too broadly. You know, I’m curious how you see that apply, Raju, when we’re talking about the people doing the selling. Let’s talk about the sales team, and the sales organization, and the growth of that part of the company.
Raju: Yeah, I mean [laugh], I believe, you know, if you’re going to build a sales organization, it’s got to be built around the business model and the product, right? You don’t want to hire—you need to pick your process, right? Like, there’s solution selling, there’s vision selling that requires a depth of capability and a lot of—a long, long sales cycle. And if you are elephant hunting, you are going to be building—you know the sales cycle is going to be a year. And the type of sales rep, you know, can’t be a mechanical one.
And so, I’ll give you a little story, right, [laugh] and Jason knows this story. I was running International for Lucent for some of the emerging technology stuff, and I had this one sales rep, you know—I—the Mexican market—I was, like, working in 20 different countries: I had seven in EMEA, seven in AsiaPac, six in CALA—and I looked at each of the markets, and Mexico was underperforming. So, I went down there and there was one rep who was killing it, and there was, like, seven other reps who were just floundering [laugh]. And I just talked to one rep, and I’m like, “What are you doing right? You know, what everyone else is doing wrong?” And he’s like, “I read the book.” And I was like, “What?” He goes, “I read the book.” So, I was like, “Just bring the book in. Like, bring that book in and put it on the table and have everybody read it.”
Jason: Right. Is this a religious text? What book?
Raju: So, [laugh] he’s like—he comes in with this white binder, which is a Lucent sales manual and he puts it on the [laugh] table. And I’m like, “Everybody has this book [laugh]. Why is nobody hitting their numbers?” And he was just like—it had a methodology in it, it you know, talked about the products, it said, like, “Make sure that you’re spending equal amount of time trying to close deals as you’re building your book of business for the next quarter.” Everybody else was just like—they would go to their top deals, they would spend all of their time and energy on it, and either they would close or they wouldn’t, and they’d miss their quarter. And if they hit, they weren’t building the book of business for the next quarter. And so, this guy was just following a methodology.
And so, I think job number one is to pick your business model and what kind of reps you want. Job number two, is to pick your methodology, right? If you’re going to focus on BANT—you know, Budget, Authority, Need, Timeline—or you’re going to focus on NEAT—which is Need, Economic Impact, Access to Authority, and Timelines—just a variant on BANT, or MEDDIC, or Sandler System, or value-based selling or solution selling, whatever you want to do, pick one and just build that process into your sales organization. And figure out if your reps quickly are doing the right things. They may not be closing deals right away, but are they going through the right sets of exercise?
Are they avoiding happy ears, which every rep has when they first start? He’s like, “This deal is going to be $2 million,” or, “I got this one.” And you know, it’s a game of numbers, right, we all know that, and so you have to have—and that’s why this guy who hit their number every quarter in Mexico, he wasn’t excited about a particular deal. He just followed a process, and it worked.
Jason: Yeah. And that’s the beauty of it, right? That’s like, don’t reinvent the wheel. The wheel has been invented. We still put them on cars, and planes, and trains, and wheels are everywhere. We have the enterprise sales wheel—the B2B sales wheel, I will say; it doesn’t need to be enterprise—and that’s the beauty of these businesses.
But it’s really identifying—you know, I’d love for you to kind of like, unpack, maybe rewind a little bit before we get into the methodology piece, which I’d love to dive into a little bit deeper, how does a young company figure out—they might have that sense, right? It’s like, “I’m building this big piece, there’s big budgets for this software, therefore, I will get big budgets, so I’m elephant hunting.” Or like, “I really want to just go after SMB markets, you know, long tail, got to sell thousands of them.” That might not be—you know, that initial thesis might not be correct. How do these young companies—we kind of got into, like, firing early customers, but at the early stages, how would you recommend people go out and actually explore and find out, right? How do you experiment and figure out where on that spectrum you’re going to fall before really doubling down into this kind of coin-operated machine, and really orienting your sales methodology around that?
Raju: Honestly, this is an art form more than it is a science. And—
Jason: And we’re talking to Picasso.
Raju: You start with a business, and you’re like, “I got an idea”—
Jason: [laugh].
Raju: —“And I think I can sell into this market with”—you know, there’s a void in the marketplace for this particular product, and you go out and you, you know, sort of raise a little bit of angel money, or whatever it is, and you build some capabilities, and you have some early success, and then you raise a seed round, which is, how do you repeat that, and is there enough repeatability? And then the next step after repeatability is another round to scale. And scale is, like, numbers and dials that I’m talking about, a dollar in marketing generates this many leads, a dollar into sales generate this much revenue, a dollar into customer service reduces churn by this amount, a dollar into, you know, whatever, each part of the function is, sort of, a numeric-based thing. And then ultimately, you scale up orthogonally, which is I want to get into different markets, I want to create another product, I want to, you know, grow inorganically and buy companies or whatever it is. But at that early stage where you’re just trying to repeat a sale, I think one of the things that you’ve got to figure out is, is the core piece of what you’re selling, do you need a lot of customization each and every time or can I just rinse and repeat?
I kind of think about an ICP. You take a very broad ICP and you say, “Okay, this is my target market.” It’s, you know, everybody in financial services, or every healthcare organization, whether it’s a clinic all the way up to a, you know, major hospital, and then you see what works, right? And you shrink your ICP, like, [unintelligible 00:19:44] two or three deals. Like, shrink your ICP and see if you can just close more of the same customers that look exactly like that.
And if you’re having trouble doing that, like, if you’ve got a very, very narrow ICP, then what that tells you is that something is wrong with your equation. You either need to change the product to broaden the ICP and build some more features, or you’re going to have to focus on even just a smaller subset of capability that you’ve got. And maybe it’s a cheaper product because the thing that resonates is just a piece of what you have, not the totality of what you have. So, it’s a bunch of experimentation. And you guys have experienced this. I’d love to hear kind of how you’ve counseled, you know, companies to do this.
Jason: Well, before we throw it over, I know you—and you’re a fantastic seller, we’ve thoroughly established that—I’d love for you to tell the story about walking out of rooms in terms of price discovery, like, finding that price. I love this story—I’ve heard it a bunch of times—but what you’re saying the art—bringing it back to very, like, practical and direct—is you need to experiment, and you need to know when to double down and when to broaden, and not be afraid of broadening and saying, “Oh, we don’t know who our ICP is.” That’s not a bad thing. You don’t want to double down, scale a bunch of Band-Aids, and then have to support those Band-Aids and deploy people. Like, that’s not going to create a slipstream, right?
You need a—best companies triple, triple, double, double, double. Like, you can’t triple, triple—oh, sorry, triple, triple, triple, double, double—er, no, wait. No, it’s three [laugh]—two threes—
Raju: Two triples, three doubles.
Jason: —three doubles. Exactly. Like, that is really, really tough to do. It sounds simple, very tough to do if you don’t have—you are in the wrong pocket of yeses, and you’re either too narrow or too broad, doing too much customization for small deals, not enough—maybe not enough customization for the big deal so they don’t get over the goal line, or they take too long. But I’d love for you to tell, kind of, one of your stories about doing price discovery for, like, an enterprise sale. Because it’s an example of experimentation. So, I’ll let you tell that story.
Raju: Yeah. Yeah, I mean, so I was at Lucent at the time, and we were selling internationally, and I had a really good rep. And the product was really expensive, right? It was a giant switch [laugh] millions of dollars, right? And—just to build.
Jason: One huge light switch.
Raju: You know, you got to know your product, right? If your product is sort of ten million bucks, or three million bucks to build, then you know, you’re going to have to charge ten million bucks for it. So, you know, this rep was just amazing. He had built this rapport with the customer, and he had, like, four or five individuals that he set up this meeting. And he noticed that there was, like—his champion was there, but there was, like, relatively junior people in the room.
And he’s like, “Hey, listen, I brought my executive in here. This is sort of a deal closing day. I just want to make sure that everybody in this room is capable of signing a $10 million check. Because if this isn’t a $10 million room, we’re going to go.” And everybody looked at each other. And I think they were over their skis, but nobody wanted to say it. And so, what wound up happening was, they all said, “Yeah, no, no, we can sign,” and then a couple of minutes later in rolls, like, a more senior person.
Will: [laugh].
Jason: [laugh]. They created the ten million dollar room.
Raju: Created the ten million dollar room. But you know, that product was sort of known. Like, the previous question you asked where you’re experimenting, you know, I think you kind of sit there and say, like, “This is what we’ve built, and, you know, can we repeat it? If we can’t repeat it, what do we need to do? Do we need to shrink our ICP or grow the product?”
And that’s the experimentation that goes on. You know, growing the product requires effort and time, it better be the right product that you’re building. And if you’re going to shrink the ICP, it better be big enough when it’s shrunken, for you to actually live off of. And so, I think that’s what you do. But yeah, when you have the product kind of—when you know you got to get ten million bucks, then you got to sort of perform the right tactics.
And I’ve got a bunch of tactics that—you know, quirky, interesting things that good salespeople have done, and I’m happy to walk you through that. Or we can just go into some numbers on what a good organization should be doing and planning around, in terms of, you know, sales rep quotas, and pipeline, and all that kind of stuff. So yeah, happy to take this in any direction.
Jason: Great. Let’s get into them.
Will: Let’s get into those numbers, particularly as you think about kind of the growing sales organization. I think that, you know, in my experience, there’s an awful lot of technical founders who don’t have the kind of experience with the sales methodology like you were talking about earlier, and they end up sort of feeling their way through this topic, getting some coaching from board members, experienced CEOs with a lot of direct sales experience, and it all ends up kind of boiling down to a set of numbers in terms of productivity. How do you think about those for the growing direct sales organization?
Raju: Yeah, happy to walk you through them. I mean, and these are just boilerplate. Like, this is templatized; everybody needs to sort of think about it with some nuances. But, you know, typically when I walk in, without understanding so much nuance on the product, the sales rep’s quota, typically should be 5x their OTE. So, if a rep’s making 120,000 in, you know, salary 60 days 60 in commission, he should be generating 600k, you know, of quota for the year.
But one quick little aside for that, you really need to understand your product lifecycle. So, I’ve been around a lot of companies where the deal sizes start small, and then there’s large upsells within six months. Not a year or two years, but six months. And so, you got to count that as comp towards your sales rep. Because if you start out, you know, with, like, a $10,000 sales, but it winds up to be $60,000 after six months, you know, you want to say that $60,000 is what the sales reps comped on because that’s what you’re seeing in the market: people start smaller. So, that’s one important, sort of, base metric.
A second is your aggregate sales quota. If you have ten reps, you really want your aggregate sales quota to be 120% of your overall business plan. You got to assume that all the reps aren’t going to hit their numbers and that there’s some cushion in there for the business to operate. You know, you need to pay attention to win rates, you know? Well, we all want to win a hundred percent of our deals, you know, typical win rates are 25%. And if you are hitting a hundred percent of your deals, you’re probably undercharging [laugh].
Jason: Yeah. Yeah.
Raju: You know? You want to basically do some price sensitivity and figure out how you can charge more.
Jason: You want to be in a $10 million room. Is this a $10 million room?
Raju: Yeah, exactly. And so, you know, quarterly pipeline? The pipeline that you’re going to quote—that you have for the quarter should typically be three to four times what your plan is. And if it isn’t three to four times, knowing that you’re a 25% win rate, you’re kind of screwed.
So, I walk into a quarterly, you know, like, at the beginning of the quarter, and I say, “What’s your pipeline look like?” And you know, it’s X. And I say, “Well, what’s your win rate?” And they’re like, it’s 10% or 25%? And I’m like, “You don’t have the pipeline to make the quarter. You’re going to miss the quarter.” I know right off the bat. And then they tell me, “Well, we’ll get a bunch of pipeline in quarter that closes in quarter.” Never ha—I mean, it happens, but that’s bluebird stuff.
Jason: Yeah, only if you have a super short sales cycle, right? If you have a 30 day, like, end-to-end sales cycle, you can affect your number in quarter, but vanishingly few companies have a 90-day or less, like, enterprise or B2B sales cycle. There are some instances where that is the case. But yeah, it’s pretty easy to see very quickly, like, are we going to hit? It’s just math. Once you know your numbers.
Raju: Yeah. It’s just math.
Jason: Yeah.
Raju: And that’s the thing. You know, I always thought sales was like, an art form—and it is; there’s a little bit of art there—but a lot of it is just raw numbers, that Mexican sales guy, “I read the book,” you know? I mean, just it’s numbers. Its numbers.
Jason: Yeah. Well, and the other kind of metric in there is ramped sales quota capacity.
Will: Yep.
Jason: So, you might have the pipe, but if you don’t have the actual number of ramped sales, and it fits into their quota—with a margin of error, as you were saying; not all your reps are going to hit—you can also see very early, hey, we’re not going to have enough sales rep to even hit Q3, even if we had all the pipe. We need to be onboarding salespeople earlier, and anticipating, what are we going to do next year? What’s our all-in sales cycle plus are all-in ramp time, plus factoring in a, you know, a certain percentage of new sales reps that aren’t going to hit, and your existing sales rep that might either turn or not hit as well? You know, there’s multiple variables in here. It is not rocket science, but there is… there’s a lot of things where it’s kind of easy to see whether or not you’re going to hit the number.
Raju: Yeah. A hundred percent.
Will: I think that’s such a crucial point, Jason. You know, I like to think about a company’s rated selling strength at any given moment in time, which is a function of the number of [quota-countering 00:29:15] salespeople who are not only fully ramped but proven to be productive. And one related topic, that’s frankly, not often talked about, I think, is how fast you actually cycle through salespeople. In watching most direct sales organizations ramp from call it zero through 20 million in run rate, I think the failure rate on salespeople is higher than 50%. And part of that as a function of the kind of people who you’re going to be able to recruit at that stage of a company’s life, when it’s still early and the commission plan is evolving, and it’s not yet clear that you can make a lot of money there, so you’re probably not going to get the most proven, experienced sellers, but it’s also a function of the pace at which the organization is learning to sell the product. And then those two things work in tandem. And so, weirdly, you have to over-hire.
Raju: Yeah. You hit the nail on the head, Will. I mean, Jason made a really good point around do you have ramped reps, but the flip side of that is, even if you have ramped reps, you’re going to lose 25% of the organization, typically, in any given, you know, year, I guess it is. And if you don’t have a backup plan, or if you aren’t constantly interviewing, you’re going to lose a ramp rep and you won’t have the capacity. So, you have to assume—you might have to over-hire a little bit, you might have to actually, you know, sit there and say, like, I need to shorten my ramp interval, right, by bringing in some really good tools to accelerate the learning process.
So, there’s only so many levers you can pull, right, but quota capacity is key. Jason, you said it. And you know, you don’t have enough capacity for a couple of reasons: your reps aren’t ramping fast enough, or they quit or you fired them, and you don’t have enough capacity, or you just didn’t do your job properly, and you assumed the reps were enough and ramp time wasn’t really factored into anything. So, really good points.
Jason: Yeah. And I think also, you know, we’ve talked about, previously internally, about, like, revving the engine. And, you know, you can rev the sales engine, hire [bunch of 00:31:26] sales. Can you feed those salespeople, you know, you have enough marketing coverage? And you need that sales and marketing to also be feeding into product, right?
And there’s this kind of like triad of sales, marketing, and product, and usually you want to ramp as fast as you can until something breaks, and then go fix that problem. Maybe there’s a product that sales keeps coming back and saying, “I got to unlock these [laugh] deals, but in order to do so, I need this feature.” Right? And so, you can hit these, kind of, ceilings where you got enough leads, you’ve got the ramped reps, but there’s this pocket of elephants or deer or whatever it is, that you just can’t unlock until product brings that to market.
Or you have starving sales reps as well. If you don’t have enough pipe back to your, you know, close rate, you know, you got to be able to feed everybody as well. And so, it’s kind of a rapid—once you’ve got, you know, a nice functioning engine of those three groups, you press your foot on the gas and until you hit the next rate limit, and you got to go solve that problem. And sometimes it’s not necessarily in sales. It might be due to the other two, kind of, key functions in that trio.
Raju: Yeah.
Will: You’re so right. So, maybe it’s time just for a little bit of storytelling. We’ve all watched these sales organizations ramp, and have met a lot of sales characters along the way. So, I’ll kick things off with the story of really maybe one of my favorite founders I’ve ever worked with. So, my very first investment at RRE was in a procurement software company called Frictionless Commerce.
And like a lot of founders, his name—we’ll just call him Alex—Alex wanted to do whatever he could to help the organization succeed. And while the company was growing and closing deals, his career trajectory was actually down through the organization. He started as CEO, and then he stepped aside to make room for an experienced CEO, and he became president, and then the organization grew, and so he dropped down, and he became the VP of Business Development. And after four years, this was an organization of several hundred people, and the founder had gone from being founder and CEO, to founder and direct sales rep.
And he was a phenomenal salesperson. And he’s the person who taught me that very often, when you’re learning to sell the product, it’s the entrepreneur who is going to be most agile in learning how to—in knowing how to position the product with customers. The entrepreneur really has to invent the sales methodology before it can be institutional knowledge and taught to a lot of other sales reps. And Alex did that, and became not only a great salesperson, but a cultural standard-bearer of doing the right thing for the company, as his career kind of went sideways to down while the organization grew.
Raju: Yeah. That’s a great story. I won’t tell a story at my end, but I’m going to tell you some really quirky or interesting things that I’ve seen great salespeople do in organizations, whether they worked for me in one of my three startups, or you know, they worked on some of my portfolio companies, just some tips for your sales team or whatever. One of the greatest sales guy I had, he would set up double meetings. If he was traveling to a site, you know, some kind of long distance sale, like, you had to be on site, and he had just traveled, like, six hours or whatever, he would book double meetings.
He would basically book a meeting with the organization on a Tuesday, and then he would build another two hours in on Wednesday. Because traveling back and forth, you know, just took the effort and time, and so he knew there will be questions or items that came up, that went unanswered, but they would have already reserved the time for him the second day, and he would have all of that locked up and closed. And so, this guy would close deals, like, 25% Faster than all the other corresponding reps because he just built in that second meeting the next day. And these were for enterprise sales. It wasn’t, like, a quick hit, you know, you kind of have a meeting, and kind of make a decision thing.
The other thing I’ve seen happen is something called cancellation pouncing. So, one of the problems that you get in organizations is, oh, we have something a month out [laugh]. And you’re like, “Shit, I was really hoping to close this thing this quarter.” And so, what the reps does is just calls the assistant, makes a great rapport with the assistant, says, “Anything canceled? Did anything get canceled?” Every few days, he would call, or she would call and then, you know, if something [squoze 00:36:08] in, he would jump into that slot, even though it was like—so he would take this month out and bring in, you know, something into, like, within that week.
And then one of the other things that great reps do is they’re just—inevitably, in your sales process or methodology, you miss something. You say, you know, like, “How am I going to get this deal done? Walk me through all the steps that it would take to get the deal done?” And your champion will inevitably leave steps out that they just—you know, they don’t—you know, purchasing needs to go through this. So, the question to ask is, “Can we walk through a deal that you just procured—some software that you just procured, or some hardware that you just procured—and just walk me through how long that took from this point forward, and exactly the steps that you needed to go through?” Because they’ll say, “Oh, yeah. No, it has to go to purchasing.” And you’re like, “Shit, I don’t know the purchasing person.” Or, “I don’t know this person.”
And then one rep told me, like, look, I always take notes, just because even if I’m writing down nothing, it looks like I’m actually interested in what the customer cares about, you know? And they might be not telling me anything unique, but it just, you know, I’m paying attention, and it looks like that. So, anyway.
Jason: Yeah. I mean, those are all great. I’ve been trying to get Claude [Opas 00:37:21] to write us a haiku about sales… methodology [laugh]. “Build trust and rapport; consistently deliver; strengthen the bond.” Yeah, beautiful. [pause] [laugh].
It’s probably time for the classic round up—
Raju: The Gatling gun questions.
Jason: With Raju. Unless, do we have any other—I mean, listen, we will be doing more in sales. We just want to—you know, in terms of, like, future podcasts—this is, as you can imagine, for early stage venture investing, this is a key focus for us as board members and investors to help our companies along these journeys. So, we want to continuously be providing, you know, what we’re learning and what we have learned in our experience. So, expect more on this topic in future podcasts. But let’s wrap it with Raju’s Gatling gun questions. Hit us.
Raju: Yeah. So, here’s the Gatling gun questions, and I just want to throw out to both you guys. So, what year do you think an AI agent will be able to close an enterprise software deal?
Will: Wow, that’s a great question.
Jason: How big are we talking, ACV?
Raju: Uh, let’s say it’s $100,000.
Jason: I’m going to say probably 2025… or 2026.
Will: Yeah. I would have said within two to three years.
Jason: Yep.
Raju: All right. I mean, I’m kind of with you guys, but I think it’s coming.
Will: Yeah. I mean, I think it will happen inside of a sales methodology that has a strong outbound component, where deals are already getting done over the phone, for sure, and there’s a download-and-try element to it. But I think we’re not far off. And that AI agent, they can stay up all night, [laugh] asking the assistant when there’s a cancellation. Nothing holding [it 00:39:11] back.
Raju: Yeah. The other tip is to get your proposals out within 24 hours. I guarantee you an AI agent will get a proposal out in 24 hours.
Jason: Yep.
Raju: All right, just shifting gears. What is—you know, we all know the standard sales tools, Salesforce, Salesloft, you know, all the classics out there. Which one do you, kind of, gravitate—like you guys have all sat on enterprise software companies and SaaS companies. What tool do you want people to know about that you find intriguing, or interesting, or valuable?
Jason: Honestly, this is the boring answer, but I think I’ve seen enough companies, for their ERP and CRM, start on a smaller solution and everybody graduates to Salesforce, or graduates to NetSuite, or SAP [laugh]. And so, the actual answer for me is, like, bite the bullet fairly early, standardize on an industry standard, and move forward, particularly if you’re going to be bringing in, you know, an experienced CRO who’s coming from a larger organization. They’re likely already on Salesforce, and so they’re going to want to run the org in the way that they already know. And you might waste time in a crucial part of your company lifecycle shifting platforms. So, it’s boring, but that’s my answer.
Raju: That’s a good answer. I like that answer.
Will: You know, I don’t have a really different answer, but I just want to point out that in every company I’ve ever been on the board of, there’s this moment where they redefine the sales funnel process more rigorously, a new head of sales or new leadership in the company comes in and says, “Yeah, we cleaned out the pipeline. There was like 25% of what was in there was really qualified the way it should be, was really as mature as we thought it was.” And I feel like there’s a lesson in there of be brutal, be rigorous in how you qualify things at every stage because it forces a company to live in reality—a board, a finance organization, all the rest of the supporting parts of the company—to live inside of the reality of what is real in the sales funnel. And in the early days, it’s all about the bottoms up, what’s actually moving because that’s what’s going to get across the line.
Raju: Do you have thoughts on that, Jason?
Jason: No, I just—this feels like the musket round, maybe not Gatling gun [laugh]. We’re going deep.
Raju: Yeah [laugh]. It’s not the [Gatling 00:41:36].
Will: We are reloading slowly [laugh].
Jason: [laugh].
Raju: [laugh]. I’m going to say there’s two things that organizations don’t do enough of: one is sales training, so I’ll say Mindtickle which helps you ramp your organization faster; and then, feedback loops to your salespeople, I would say Gong, which is a great tool to record your sales reps and figure out how they’re pitching in correctly or correctly, and reinforcing you know, the good pieces as opposed to bad pieces. Okay.
All right, what’s the zaniest thing you’ve seen, you’ve done, or seen someone else do in order to close a deal?
Jason: I guarantee Chase [Feiger 00:42:14] did it.
Raju: [laugh].
Will: [laugh].
Jason: I guarantee it. I mean—
Raju: He probably did.
Jason: —that man can sell. He’s like hanging out at, like, people’s houses, meeting their children.
Raju: No, no, I think he sent a picture of his feet to one of the prospects. Like, he was just trying to get feedback on, like, some—there was some kind of, like, rash or something.
Jason: It’s some medical thing, and—yeah.
Raju: Yeah. But it created a rapport.
Jason: It created a [laugh] rapport.
Raju: [laugh].
Jason: [laugh].
Will: This isn’t from a classic sales organization, but it is something that happened to me years ago. So, I was in a pretty heated negotiation around a deal that we wanted to invest in. And it was a selling situation. I was trying to sell the fact that they should do the deal with RRE at a lower valuation than the company was seeing elsewhere. And the CEO of this business said to me, “You know, your term sheet, it’s like apples and oranges. It’s completely different from your competitor’s term sheet. Like, you know, you’re just in a different place.” And so, the next morning, we delivered a bushel of oranges and a bushel of apples to his office [laugh].
Jason: That’s awesome.
Raju: That’s great. That’s awesome. I did something similar, which is, I once brought a designated drinker to a closing meeting.
Jason: Oh yeah, that’s a great story. Musket round. I love the musket round. It’s better than the Gatling gun. Hit us with this story.
Raju: Yeah, this is the musket round. I was trying to close a deal with one of the big carriers—this one was Sprint—and the guy across the table who [unintelligible 00:43:36] the deal was a big drinker. And I didn’t want to negotiate while I was drinking, so I literally brought somebody who I could swap drinks with so I was sober when I was closing that round. And you know, he would look the other way, I would swap my full drink with my designated drinker’s empty drink. And you all know this guy who was my designated drinker: it was Dan Rosenberg—
Will: [laugh].
Jason: Oh, my God.
Raju: Who is now one of our CEOs at Octane11 [laugh].
Will: That was awesome.
Jason: There you go.
Will: That was awesome. Did the designated drinker have a speaking role, or were—
Raju: No. No. His job was strictly to drink all my alcohol.
Jason: Just to drink to keep you sober. And you know—and I feel like—yeah, I was probably your designated drinker in my early days here at RRE—
Raju: Oh, many times, Jason.
Jason: Yeah.
Raju: Many times. All right—
Jason: It’s an important role.
Raju: It is.
Jason: Last one, I have one last one. It’s not that zany, but I just love that it’s just kind of like this quirky thing that you can figure out about a sales process. Latch when they were selling to these big real estate owners, it turns out, the owner of the—they’d be selling these, like, $5 million, $10 million, like, long-term deals—and one of the key things was everybody wanted to try the handle of the lock. It wasn’t their SOC2 compliance, it wasn’t their—you know, all of the whiz bang security, and the this and the that. It was like they—so they’d bring an actual lock, and, like, the head of the real estate firm would go in and just jiggle the handle—
Raju: [laugh].
Jason: —and they’re like, “Oh, yeah. That’s a good lock right there.”
Will: They wanted to know that it felt expensive.
Raju: Right.
Jason: Yeah, yeah, yeah. Like, that’s going to keep our doors secure.
Raju: I only got two more. I only got two more. Okay, funniest sales joke you’ve heard?
Will: No, I don’t have one.
Raju: No? I got one. I’m going to tell it.
Jason: Go. Go, go, go.
Raju: Okay. So, a guy dies, and it’s an unfortunate accident. I don’t want to go into how he dies, but he goes to the pearly gates and he sees St. Peter. And behind St. Peter is the pearly gates with white clouds, bright lights, very calm, serene. But just under his feet below the clouds, he sees, like, this amazing party, like, champagne’s flowing, it’s an amazing DJ—I think it was Tiësto, or Griffin, or somebody, Steve Aoki—and there’s men down there, women down there, they’re laughing, enjoying themselves. And so, he says to—you know, St. Peter says, “Hey, welcome to heaven. You can proceed through the gates.” But the guy keeps looking down, and he’s kind of enamored with the party down there. And he says to St. Peter, “What’s that?” St. Peter says, “Oh, you don’t want to go down there. You’d much prefer walking through the pearly gates.” And the guy is just fixated on the women laughing, and the energy coming from below and he says, “I’d kind of rather go there.” And he says, “Are you sure, son, because if you go there, you can never come back.” And he says, “Oh, I’m sure.” And poof, he goes down to hell, and now he’s surrounded by Satan and these hideous looking demons, lava, really hot rocks on his feet. And he says, “Hey, what’s going on? This looks nothing like what I saw above.” And Satan says, “Oh, that? That was the work of our marketing department.”
Jason: [laugh]. That’s pretty good. That’s pretty good.
Raju: It wasn’t that great. But it’s a little bit good. Okay. Last question. Best sales-oriented movie?
Will: Isn’t it Jerry Maguire?
Raju: Excellent one, Will. Excellent. I’m going to go with either Glengarry Glen Ross or Boiler Room.
Will: Nice.
Jason: Interesting. I’m ju—I just keep going back to The Big Short, just like—
Raju: Oh, that’s good.
Jason: —hawking—like, shorting the entire mortgage market [laugh]. Like, that’s a tough sale.
Raju: That’s not a bad one. It’s not a bad one. All right, Jason, you want to wrap this one up for us?
Jason: Yeah, that’s a wrap.
[pause]
Will: [laugh].
Raju: [laugh]. Oh, that’s hilarious.
Jason: Tune in next time [laugh] to RRE POV. No, but you can follow us on all of our socials. We’re at RRE on Twitter—now X—LinkedIn, and yeah, we’ll keep these turning out. We got a big backlog, so these will be coming out every two weeks, and we’ll talk to you next time.
Raju: Awesome. Thank you all.
Will: Thanks, guys.
Will: Thank you for listening to RRE POV.
Raju: You can keep up with the latest on the podcast at @RRE on Twitter—or shall I say X—
Jason: —or rre.com, and on Apple Podcasts, Spotify, Google Podcasts—
Raju: —or wherever fine podcasts are distributed. We’ll see you next time.