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Venture Capitalist Firms

Yes, You Do Have To Pay Sales Commissions When a Partner Mostly Closes The Deal



Q:  Should we deduct partner referral fees from our sales people’s commission?

This is an important question and the answer is generally No.

At first, this will confuse you as a founder. If I have to pay a partner say 20% of a deal, and they do a lot of the work — why do I also have to pay my own sales rep a full commission?

Because what we all find is that, at least for a long time, if you don’t provide a commission to everyone working the deal, there is (x) too much conflict and (y) more importantly, no one is motivated enough to help the other if they don’t get a full commission.

So yes, at least for a while, with many partners you may in essence need to pay a double commission. One to the partner, and one to your own sales team. It’s OK if it gets the deal done. Especially, if the customer stays for years and years.

Later, you may develop a team that manages your channel.  Once you do, if the revenue from a channel is large enough, you can often pay lower commissions that you do for your direct sales team.  E.g., perhaps a channel manager can own a $2m quota, vs. $500k for an AE.  But even there, it’s two commissions.

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Venture Capitalist Firms

It Doesn’t Really Matter When Your Competitor is Acquired. (Except It Means You Weren’t.)



Screen Shot 2014-05-15 at 6.29.50 AMThere’s a common bit of advice we entrepreneurs and execs always get:  worry less about the competition, and more just about growing your own business.

It’s good, sound advice.  But goodness — it’s hard advice to follow sometimes.  Between your competitors’ 100 tweets a day about how Everyone In the World Loves Them, their $50m in venture financing last week, their We Rule the World press releases (that no one reads but you) … competition is all around you.  And that’s not even including the deals you are working on every day, every week, every hour, trying to beat the competition.  If you’re a founder or in sales or marketing or customer success … you’ll be talking about the competition Every Single Day.

And the one thing though that gets your attention more than anything is when a Big Tech Co. enters your space.  Either by building a product from scratch — which is anxiety-provoking enough.  Or worse, buying a top competitor that already has great customers and real traction.  Oy.

Yeah, it’s good to worry.  I mean, if Salesforce buys your #1 competitor, they have, overnight, added two orders of magnitude of resources and potential customers and all that to your competitor.

But let’s look at the empirical evidence in SaaS (and some adjacent examples):

  • Salesforce buys Assistly ->  Did this kill Zendesk?  You probably have never heard of  It’s since been shut down.
  • Oracle buys Eloqua for $1B.  Salesforce buys ExactTarget buys Pardot.  Did this kill Marketo, or $20B+ Hubspot?  Not near as I can tell.
  • Twitter buys Tweetdeck.  Did this end the market for Hootsuite or Buffer, or really anyone?
  • Shopify launched its own email product.  Did this kill Mailchimp?  Of course not.  Did it kill Klaviyo, which focused #1 on Shopify ecosytem?  No — it raised at $4B+ shortly thereafter 🙂
  • Twilio launched its own contact center product, Flex — which has done very well.  Did this kill Talkdesk, or Five9, or RingCentral, or Dialpad, or any of the unicorns in the space?  Well, no.
  • SAP buys Ariba.  Coupa and Tradeshift keep growing. Maybe even faster.

The list is endless.

And it’s not like a lot of these acquisitions failed or anything.  In fact, most of the products on the list above have substantially grown post-acquisition or post launch.  In turns out, once an enterprise application has hit at least $30-$40m in ARR … it’s almost impossible to kill.  It will still grow, the customers will still renew, etc.  For years, even worst case.  Throw some more sales resources on it, and it can accelerate post-acquisition.

But somehow, even though they maybe could if they really, really, really wanted to … the acquirers almost never kill the competition post-acquisition.  Nine times out of ten, they just seem to grow the market, make the competition stronger.  Maybe because so many SaaS categories are really natural oligopolies, not monopolies.  More on that here.

Of course, having said all that, there’s one thing that’s relatively clear:  when a Big Tech Co buys your competitor — I highly doubt they are going to buy you, too.  Having been a VP in a Fortune 500 Tech Company, I can tell you: acquiring two of something is really, really tough.

So if Google, Salesforce, Adobe, Oracle, whomever, buys your competitor — scratch that acquirer off your Liquidity List.

But otherwise, just act as if your competitor raised another $20-$40m in venture capital.  Which they did, because that’s how much extra capital the acquirer will allocate to them.  And assume they just added a deep, unbreakable strategic partner in the acquirer itself.  Salesforce is forever aligned with Pardot 😉

But maybe … not too much more than that.

(note: an updated SaaStr Classic post)

As Long As You Are Growing 60% Or More — Your Competition Can’t Really Hurt You


The post It Doesn’t Really Matter When Your Competitor is Acquired. (Except It Means You Weren’t.) appeared first on SaaStr.

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Venture Capitalist Firms

The 48 Types of VP Sales. Make Deadly Sure You Hire the Right One.



Ah the VP of Sales.  The toughest hire.  Such a high failure rate.  I want to help.

So this is the third in our series.  The first post is What a Great VP of Sales Actually Does.  So you expect the right things, and hire your rockstar at the right time to do the right things.  The second post is a script for you to use (and modify as you see fit) – 10 Great Questions to Ask a VP Sales Candidate.  So you hire someone that really did it, and can do it — not a pretender.

OK so you’re ready to make the hire.   You know what to expect.  And you’ve got your script to help ferret out the posers.

Now — who do you hire?  Just so you know, there are 48 Different Types of VP Sales.  If you want it to work — make sure your top candidate is the right type for your SaaS company.

Screen Shot 2013-03-30 at 4.25.25 PM

First, let’s look at 4 stages of ARR and the 4 types of VP Sales that match those stages.  Because the #1 mistake is hiring someone for the wrong stage, with the wrong stage experience:

The Evangelist.  The Evangelist is someone that is generally very smart and passionate about your product (already understands it in the first meeting) and is very customer-centric.  The Evangelist can immediately go out and just start selling your product to anyone they can get a meeting with, and can chat the ear off any in-bound prospects.  The Evangelist can seem like just what you need to hire, if you’ve never hired a VP Sales.  You’ll like the Evangelist.  A lot.  The problem with The Evangelist?  He or she has never actually built or scaled a sales team before.  They know how to think creatively and cross-functionally.  They’re fun to work with.  But 9 times out of 10, this is a waste of a hire and your time.  Because you have to be the evangelist, along with the first 1-2 reps you hire.  Look for these skills in your first reps.  But after that, you need someone that can scale and really build a team … not just be engaging.

The only exceptions I can imagine here is if you are just a disaster at anything customer-centric, and you can move this person over to say VP Biz Dev after they hire the first 1-X reps and a VP Sales for you.  That can work if the founding team simply lacks any innate talent here whatsoever.  But if you do this, you’re going to need to bring in a real VP Sales pretty quickly, as soon as you hit $1-$2m in ARR probably.

Mr. Make-it-Repeatable.  This is the unicorn.  This is what every SaaS company post-Initial Traction needs, like a VP of Demand Gen Marketing (vs. Corporate Marketing).  The problem is 99% of VP Sales can’t do this phase.  In this phase, you have some customers.  Not a ton, but some.  You have some in-bound leads.  Not enough, but at least a few.  You have a micro-brand.  You’ve hired 1-4 reps on your own.  But you have no idea or ability how to scale this or get it to the next level.

Here’s what happens with Mr. Make-it-Repeatable.  Almost immediately, your Revenue Per Lead goes up.  Because he knows how to close.  He knows how to hire and recruit.  And he knows how to build the basic processes you need to do it again, and again, and again.  Because he likes winning, he likes managing, and he likes figuring out the puzzle of how to get from $1m or $2m to $10m or $20m+.

This VP Sales has to make it happen.  He can’t pretend or hide behind Powerpoint presentations or “pipeline” dashboards.  He can’t take credit for other’s people’s work.  He can’t just be a glorified order taker.  Most folks with Director or VP of Sales “experience” on their resumes can’t do this phase.  But if you find someone at this stage that has actually done it before, for real — it’s glorious.  Find this person.

Ms. Go Big.  This is hard to find for real, too, but it’s not quite as hard as Mr. Make-it-Repeatable.  Why?  Because coming into a decently funded SaaS company with $10-$20m in ARR … well … it’s all a process.  You sort of do the same thing, again and again.  Hire the right people.  Work on an SDR program.  Make field sales work.  Figure about out-bound.  Get the lead generation engine really working with the VP Marketing.

It’s hard to find these candidates but you can find them.  Just get them from a company that just went through this phase.  But don’t expect 95% of these candidates to be able to do the earlier phase, from $1-$10m, if they haven’t really done it before.  Our VP of Sales at EchoSign, Brendon Cassidy, was able to do the whole thing.  It helped that he’d been the first head of sales at LinkedIn and build out corporate sales there from zero leads and almost zero revenue …

And unlike Brendon, not all Mr. Make-it-Repeatables can scale and grow into Ms. Go Big.

>> Also, note one key thing: it’s extremely unlikely any VP Sales candidate from Salesforce, from Successfactors, from Twilio or Stripe (yes these are big companies now), from whatever Big SaaS company can possibly fill either of these roles.  They will all almost certainly fail.  Why?  They just never even remotely did it.  Joining Salesforce when it was at $1 billion in revenue, even as a manager?  Yes, it’s SaaS … but the sales processes at $1b+ just are so different from an $xm ARR start-up.  It’s not their fault — but they just won’t understand how to do either of these phases.  With enough capital, they can hack the Ms. Go Big phase, but even then, it’s rough and expensive.

Mr. Dashboards.  This is unfortunately what you get a lot of when you try to recruit out of the Big Cos.  This guy really understands how to sell up.  How to make an internal presentation.  And he often looks pretty good in a suit.  Your board will probably love him.  But really, all he does all day is look at and think about Dashboards and meet with his Managers.  What changes can I make to the team to get the dashboards up?  How do I get more resources?  More budget?  Who can I hire, and who can I fire?  How do I get rid of the bottom 20%?  Where should the SKO be this year, and what sort of suite can I get?  What events can I do behind a secret rope for my Top 50 prospects?

Look, at some point, you may need Mr. Dashboard.  That’s fine.  A manager of managers of managers.  But whatever you do, don’t hire him until you are past Unstoppable.  Because unless he or she did it for real before they were Mr. Dashboard — they have no idea how to get you to $5m, or $10m, or $20m.

-> Finally, we can distill a lot of this down to one key criterion:  Has Your VP of Sales at some point in her career sold at a startup at your ARR today?  Or at least, where your ARR will be 12 months from now?  You can stretch this to 12 months from now, because you’ll be there soon enough, and you need to hire and start selling like the startup you will be in 12 months.  So if your top choice worked at a startup at $25m ARR and you’re at say $10m-$12m ARR today, that can work.  You can backfill some of the gaps.  But it’s unlikely to work  outif you are at say $5m ARR.


OK, now you say, I get it, there are basically 4 types of VP of Sales for a SaaS company.  I’ll make sure to hire the right one.  But, SaaStr, how did you get to 48?

Aha.  Because once you have the right candidates with the right backgrounds above, then you need to make sure of three more factors:

#1.  Can They Do Competitive Sales?  Many VP of Sales are NOT good at competitive sales.  That may be fine depending on your market.  But if your market is extremely competitive, make sure your VP Sales comes out of that background.  Folks out of Salesforce, for example, are great at many things.   Competing in my experience is not one of them.  At Salesforce, they need to be good at closing, at upselling, at driving up the deal size, at getting people to buy something they may not even deploy for a year.   It’s tough.  They are competing for budget dollars and against inertia.  But they aren’t really competing with Oracle, Microsoft and Netsuite.  Not in a deadly, winner-takes-all-fashion.  Not really.

So if you are in a competitive space, make sure you hire someone that loves to compete.  If they do, it’s fun.  If they don’t, they’ll flail and be miserable.  And thus fail.

#2.  Experience With Similar Deal Sizes.   Broadly speaking, there are 3 categories of ACV for most SaaS companies:  $x,000.  $XX,000.  and $XXX,000.  Of course, you may have customers of all different sizes, we do and did.  But know your average deal size, your ACV.  Hire someone that has only done $50,000+ deals, and they’ll have no idea how to manage a high-velocity in-bound team doing $5,000 deals.  Hire someone with tons of $5,000 experience — I doubt they’ll know how to Sell to Power.  How to really get on jets and close.  How to do field sales.  Etc.  So make sure your VP Sales has at least some recent experience at a somewhat similar deal size / ACV.

#3.  In-Bound vs. Out-Bound.  If your model is primarily in-bound, make sure you hire someone that has managed a lot of in-bound.  If you need an out-bound component, make sure the VP Sales can do that.  Can he or she hire a whole floor of biz dev associates, trying to get meetings set up?  Most VP Sales have done a bit of both, but whichever is a bigger part of your business, match that to their experience.


So 4 different stages of VP Sales by ARR x 2 different competitive experiences x 3 different deal sizes x 2 types of leads/customers = 48 types of VP Sales.

No matter how exciting a candidate seems, make sure you have the right type.  I know it seems to narrow the field down quite a bit.  I’m sorry about that.  But be patient.  Find the right fit, and it will all work out well.  Skimp here, hire someone from the Other 47 — and they will Fail.  I can almost guarantee it.

(note: an updated SaaStr Classic post)

The Playbook to Hiring Your First VP of Sales and Not Screwing it Up…….with Cassidy Ventures Founder Brendon Cassidy (Video + Transcript)

The post The 48 Types of VP Sales. Make Deadly Sure You Hire the Right One. appeared first on SaaStr.

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Venture Capitalist Firms

What Is Your Worldview?



Amy and I have coffee for about 30 minutes every morning. It’s been one of the wonderful positive side effects of the Covid crisis.

Some days we land on a topic. Other days we don’t. Today, after a few minutes, the question “What is your worldview?” popped up, and we bashed that around for a little while.

The last year has had an enormous impact on my personal worldview. My underlying value system and beliefs haven’t changed, but I’ve reconsidered, rethought, adjusted, and modified many external perspectives. But that’s the easy stuff.

Amy said something this morning that caused me to jump out of my skin with delight.

“You have always been the weird kid in the corner with a big book.”

At the moment she said this, we were discussing how we understood others and how others understood or misunderstood us.

My internal perspective is unchanged, but in the last year, it has surfaced much more clearly. About four years ago, Jerry Colonna and I had a conversation described in his book Reboot: Leadership and the Art of Growing Up where I said, “I’m no longer striving.”

I didn’t completely understand what I meant by this back then, but it was the beginning of me bending the arc on my internal worldview. Jerry linked it to equanimity, which has deep roots in Buddhist thought in addition to its traditional definition.

In Buddhismequanimity (Pali: upekkhā; Sanskrit: upekṣā) is one of the four sublime attitudes and is considered: Neither a thought nor an emotion, it is rather the steady conscious realization of reality’s transience. It is the ground for wisdom and freedom and the protector of compassion and love.

I’ve anchored on the phrase the steady conscious realization of reality’s transience which speaks to me and feels reflective of my current internal worldview.

The post What Is Your Worldview? appeared first on Feld Thoughts.

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