CBO at Lyft: “How to Scale a Sales Team From 1 to 100 Reps” (Video + Transcript)
Going from a one man or one woman band to a full-fledged sales team is no walk in the park. As David Baga, Chief Business Officer at Lyft, tells moderator Will Kohler of Lightspeed Ventures, even after doing it a few times, it’s still extremely difficult. But that’s the beauty of it, that it’s challenging but rewarding when you hit the mark.
David shares his experience in building sales teams in small startups to huge, established companies like Oracle. He’s learned that moving onto the next stage of growth isn’t like playing at different levels of the same sport–it’s like playing a different sport altogether. That’s one of the reasons why you have to be extremely adaptable when growing a one-person team to a 100-person team. And you certainly can’t make the same mistake he did by trying to implement one company’s sales playbook into another.
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Announcer: Good morning. Please welcome Will Kohler, from Lightspeed Venture Partners and David Baga, Chief Business Officer of Lyft.
Will Kohler: Welcome to SaaStr 2017. I just found out, about a couple minutes ago, that we got to kick off the conference. I was going to do my best Jason impersonation, but I am not nearly as charismatic or funny, so we will just hop right into this.
It’s my pleasure to be able to introduce and just engage in a conversation with David Baga, who is Chief Business Officer at Lyft. As you all know, the topic that we’re going to really just casually discuss is how to put a lot of veneer on your business to get to a $100 million valuation as quickly as possible.
David Baga: Easy, right?
Will: Easy. In fact, it’s building and scaling your company up through the various stages. The reason why David is just such a great person to be able to engage in a conversation with is he has a very unique perspective. He’s been part of companies that have sold to different types of customers, different types of products…really operated at various stages very successfully.
Without further ado…David.
David: Thank you. I’m really excited to be here today and share some of this story. I have had a very varied background. It’s been a great privilege to have experiences that range from the biggest companies in the world, some of the most mature sales organizations like Oracle to the early stage startups, and everything in between.
With the mid market sellers like Information Builders. I’ve had a couple of experiences now where I have been literally the one man band and the first professional seller in an organization. First, at Rocket Lawyer. Then most recently, at Lyft. It’s one of the most interesting, provocative, challenging, scary, periods of going from 1 to 100.
Then things kind of start to form around you. You start to recruit and build a team. All of a sudden, you’re not on stage by yourself. You’ve got some folks to support you. You got a cast of characters. That’s a really fun period. If you keep going, you end up in a situation where you actually find yourself leading a mature organization.
You’re orchestrating and leading specialists across a wide spectrum of go to market functions. That’s where I find myself here today at Lyft. Through that experience of the Rocket Lawyers, Trapezos, Information Builders, Oracles, and Lyft, I’ve got a conclusion. Really, what it comes down to is that going from 1 to 100 is really hard.
Will: Thank you for coming.
David: I’m pretty much done here, right?
I’ve done it now a couple of times. It’s still really fucking hard. I don’t want anyone walking out of here thinking that they’re going to just take great notes and have a playbook that they could go operate against. The struggle is really constant.
I can assure you that it is the most rewarding part of the entire journey, is right here in this period.
Will: If you don’t mind, let’s do a little survey. Who in the audience would put themselves in the one man band category? Raise your hands…founder led sales, calling on every favor you have.
David: Can you see anything?
Will: I can’t see anything.
Will: How about the rock band? Who feels that they’ve got a little momentum, they have a bit of a team going? You’re feeling good, but every now and then, you’re making things up…?
How about the orchestra? How many people out there are…? If you’re in an orchestra, please, I’d like to meet with you after. Lightspeed would love doing…No.
Will: Let’s get into the three stages of growth. Walk us through, just some lessons learned, and how you categorize it.
David: I think that there are really three distinct stages. Going from finding your product market fit, to really trying to design and build your go to market model, and then finally really operating at scale and trying to drive towards profitability…They are related entities, but they are different sports.
It’s not like going from minor league hockey to junior hockey to the NHL. It’s really that you’re picking up a brand new set of skills with completely different motions. It’s important to recognize that you have to have a really conscious shift and have a distinct mindset that prepares yourself for each of these phases.
Will: I’ve noticed you don’t have metrics. Like, “Hey. One million ARR, we’re off to the next phase. 10 customers, we’re off to the next…” Why do you avoid putting metrics when it seems like that’s all people want to write about, that’s all people want to calibrate around?
David: VCs love metrics. [laughs]
Will: We do, we do…
David: [laughs] No, love metrics, too, but I don’t think it’s quite as binary. I could tell you that…It’s likely that there’s a range.That if you are under two million in ARR, that you probably are still finding product market fit. If you are 2 to 25, then you are building your go to market, but you are not yet scaling.
I can also tell you that when you think you have shut the door on product market fit and you’re like, “Check that box…” You’re coming back. You’re going to search for it again because you’re going to need new industries, new segments, new products that you’re going to introduce for cross sell and upsell.
You’re coming back through this whole stage again. In fact, you could go through this stage as an organization multiple times, even in a mature company.
Will: You’ve said product market fit a lot, probably one of the most overused terms. How do you define it? How do you think about it? It seems like something when you get wrong, when you’re not calibrated on, you start spending in the wrong direction and it’s really tough to recover.
What can the audience learn about product market fit?
David: I think I got my best lessons of finding product market fit, at Rocket Lawyer. That was the first time that I was really close to the product design engineering teams. There’s a lot that the sales and marketing organization can basically steal from the agile methodologies, from what Steve Blank is talking about, from what Eric Ries talks about, with this iteration of building, measuring, and learning.
Really, what you’re trying to do when you are finding your footing as a new company in a new category with new products or services, is run a lot of experiments. The faster that you can get that loop going, the better chances you have of identifying something that’s really working. You’re really looking for one thing that is working, first.
This can be everything from testing your demand generation channels, to testing positioning and messaging on outreach to completely different sales profiles in terms of an SDR function to an ISR to, God forbid, a field sales representative.
Will: You have… [laughs]
David: I love field sales. Don’t get me wrong.
Will: You have some tooling. You have measurement. Things are starting to show some good data. What are some lessons learned that product market fit actually still isn’t there, even though the data may suggest so?
David: I really think that it’s about creating, I call it, instrumenting the machine. You’re really trying to measure everything. I don’t care how unsophisticated the measurement is. You need to be getting it into a spreadsheet so you can analyze and learn from it.
The second thing that I see a lot out there is people not finishing experiments. They go 80 percent of the way. Then they quit on it. Yet, there’s probably the remaining 50 percent of the value of experiment is in that last 20 percent. You have to finish it so that you can feel confident that you can disqualify a go to market strategy completely.
Far and away the most dangerous error to make, I would say, is what I consider CEO magic. There’s a lot of founders out there that are the organization’s first professional seller…actually, they’re an unprofessional seller. They’re out there, and they will win their first account and maybe the first few customers.
Now they believe that they are…Maybe they come to someone like you, they raise money. Now they’re going to build their sales team. They’re going to try and hire their first VP of Sales or a Chief Revenue Officer. They’re selling the story that, “Hey, I already did this job. I was out there. I sold customer one, customer two, customer three, four, five.”
They did it with CEO magic. What I mean by that is they’ve broken some rules. They are agreeing to build something for the customer that’s bespoke. They are rolling over on legal terms, like indemnification or limitation of liability. Or, they are, even worse, giving away free trials or really, really, big discounts.
Then they bring in this professional sales organization or sales leader to build this team. They’re like, “Hey, you have to do this, but you can’t use any CEO magic.” It’s a real problem when they think they found product market fit and they actually really haven’t.
Will: Sometimes CEO magic is also called YC magic, when your entire customer lists are fellow YC companies.
You have product market fit. It’s time to put some fuel on the fire. What questions do you ask when you start to think about how do I build my go to market playbook? What are some of the triggers, the dials, that you just need to be aware of so you’re spending the right way and creating the right type of org?
David: One of the things I really make sure that I have, before I am going into building that team, is reference accounts. I really am a big believer that if I can make really successful customer that I know that, provided that my total available market is large enough, I’m going to turn that into 10.
I’m going to turn 10 successful customers into 100, and 100 I’m going to turn in 10,000. I really think that there is an opportunity to lay down that foundation of testimonials, case studies, reference calls, people that’ll advocate for you before you get into that building that go to market team.
Getting into it, the early part of my career was largely in the heavy B2B, selling into Fortune 350, government, education, healthcare. The lion share of that was at Oracle. It wasn’t until I left Oracle and I saw some very different playbooks that needed to be run.
One of the things that I think is a big mistake that I made earlier in my career was actually when I left Oracle and I went to a company called Information Builders. It was 1,500 people doing a few hundred million in sales.
I was the general manager of the Western region. I came in full of Oracle swagger and implemented the Oracle playbook. It just didn’t work. It was a huge mistake, and I had to completely reset the territories, the profile, the compensation structure, and everything.
When I went to Rocket Lawyer I saw completely the other end of the spectrum. It gave me this concept of these slider scales, of being able to evaluate what does your market, what does your segment, what does your ideal customer profile look like? On the far right, you’ve got kind of that Oracle world…selling into IT, into the biggest organizations in the world.
When I went to Rocket Lawyer, we were selling $40 a month subscriptions to Joe’s Bakeshop and very small businesses. It was very different, super high velocity, very transactional, major reliance on demand generation and very lead rich model. It was exactly the polar opposite.
Interestingly, now today, I sort of look at where I am at at Lyft as being able to leverage both of these experiences. We are going all the way from the B2C to the B2 very small B, all the way up to the most mature organizations in the country. I think that people have to really step back and figure this part out before they are able to design a go to market model.
If you aren’t hyper-aware of who your customer is, you’re going to choose the wrong type of profile of people. You’re going to build the wrong composition of team, and you’re probably going to find yourself upside down on rep level unit economics, which means you’re not going to get to that next stage of investment.
Will: What are some of the lessons you’ve learned hiring people out of organizations that have proven, in whatever sector, that they did it once? I have a enterprise sales model, so I’m going to hire someone out of the top SaaS company. Yet they come in and maybe that one playbook they had over there isn’t relevant or the dynamic’s a little different.
Do you have any anecdotes of sometimes the hiring to match that go to market playbook that you’ve designed may not go exactly as you planned?
David: I think you have to be really intellectually honest with how your organization is set up and what stage you’re at. Pulling somebody out of a mature organization that has been successful at scale, even if they are in your industry, selling in your territory pulling them in and expecting that they’re going to succeed in your very not mature, very not rigorously designed organization is a recipe for a disaster.
When you’re going from 1 to 100, what I have I guess learned the hard way, I consider myself an experiential learner, is that I think that adaptability is the number one trait that I’m looking for. I really kind of look at the world as pioneers. These are tough, gritty, adaptable, think on their feet.
Then you’ve got the settlers. Settlers come from those very mature organizations. You need the pioneering mentality when you’re going from 1 to 100.
The adaptability I think can be really broken down into three segments. Number one is, do I have the willingness to change? The second thing is, do I have the ability to change? Third and finally is, how fucking fast can you change? I need you to really move quickly to get to 1 to 100.
I really find that the thing that holds most of those folks back from coming from very mature organizations is they just cannot check off on those three boxes of adaptability.
Will: Some people think that these go to market models, and the stages of them, are very discrete stages. There are candidates that fit stage one, two, and three, and that you should expect every 18 to 24 months to change a VP of Sales.
By the way, in prep, I actually asked David this, and he looked at me and said, “Not me. I go all the way through.” Not everyone is you.
Will: Is it realistic to expect that you’re going to have to kind of change out in each of these stages because of those unique dynamics of succeeding and the nuances of dialing in the playbook?
David: I do think that, for the most part, you are going to go through some phases, and likely will have probably a couple sales leaders before you reach a Chief Revenue Officer.
I look at someone that’s a Chief Revenue Officer as distinctly different from the VP of Sales. I think that you’re really looking at a broader spectrum and trying to organize and coordinate between your product, your marketing, your sales, and business development together in an orchestrated fashion.
I’d say that there is an early stage VP Sales profile, and I think that there is a building to go to market model profile. Then there’s some folks that just love operating at scale, with their dashboards and their reports, and their operating efficiencies. That’s a completely different animal unto itself.
Will: After go to market’s dialed in, you have a very unique experience through your time at Oracle. When we talk about scaling and the orchestra, and the playbook…I mean, it’s a once in a lifetime company. Maybe you could share what it was like to take that to scale to immense profitability, and how you saw the machine work and why it did.
David: First of all, I should clarify I didn’t do it all on my own.
Will: Oh, you didn’t?
David: No, I didn’t. I did take away some really fabulous lessons out of the Oracle experience. I think that, surprisingly, a lot of them are things I’m still leveraging even at the very earliest stages. The number one thing that you take away is that Oracle is really big. When I went there in 2002, I started as a business development consultant…
Which is equivalent of an SDR today, or BDR. We were 44,000 employees. I was employee 55,773, and we…
David: Exactly. [laughs] It’s on your badge. Then I went from there and in six years we acquired 72 companies. We went from 44,000 people to over 100,000 people. That is what 100,000 people looks like. To organize a machine…
Will: That’s not Levi’s® Stadium, by the way.
David: No, that is not.
Will: They don’t get many people anymore.
Will: We have to be hopeful.
David: To coordinate that many people and have them execute, you’re really talking about a tremendous amount of discipline. The things that I really observed there, that I think are relevant to every stage of a company, is, one, document everything. They do a really good job of a documenting process and policy.
Then, they take it a step further and they codify it by turning it into workflow. That is something that we all have the means with today’s technology stacks to be able to do that.
The second thing is that it is an absolute training machine. One of my core values that I lead my teams with is outlearning. I don’t want to just outwork you, I actually want to outlearn you. I think it’s a competitive advantage. I saw that at Oracle.
I got more training in my six years there than I have in the rest of career combined. They do a tremendous job of creating a recruiting engine, a hiring engine, an onboarding engine, and they continuously work on employee development.
The third thing is, I think probably most importantly, is the emphasis on the sales culture and the frontline manager. The frontline manager is the most critical part of the entire organization at Oracle. It acts as somewhat of a Sherpa to the reps, to carry the torch on all this policy and process and systems.
They’re predominantly responsible for coaching and development. They over index on frontline manager training and development. They have such a promote from within strategy, and those people are going to become the future leaders of your organization.
At that time, when I was at OracleDirect, which is the inside sales organization for Oracle, it was led by a woman named Hilarie Koplow McAdams, who’s now the President of New Relic.
She did a phenomenal job of installing that mindset of the frontline manager. Even at 2,500 inside sales reps, 400 sales managers, when I interviewed to become a manager in my second year, she interviewed me personally. She interviewed every regional manager. It just gives you a sense of how critical of a success factor it is for OracleDirect.
Will: That recipe, that kind of “rinse, repeat” that Oracle had over such a long period of time is again very unique. It was the immovable piece of the infrastructure. It seems most companies, mere mortals of companies, even at scale, need to almost revisit some of the product market fit that go to market when they start moving either upstream, when they start testing out other markets other products.
How do you reinstitute these practices? Lyft is a good example. It’s a direct to consumer offering that we all love, and now you headed up the commercial business. How do you reinstitute that, even after it took so long to figure out the playbook over here, to relaunch internally?
David: Just to level set, I lead the teams at Lyft that work with enterprises and organizations that are trying to figure out how they can get rides for the people that they care about. This could be corporate clients that are looking for corporate travel, commute programs or perks and benefits.
In health care, it’s non emergency medical transportation. In elder mobility, really around aging place initiatives, and then, we are doing some emerging work partnering with transit authorities to solve last mile and first mile solutions. Then we have partnerships, which is where all the really fun consumer partnerships are…like T-Mobile, and JetBlue and Southwest Airlines.
We created a business unit. It has its own distinct product, design, engineering, marketing, full P&Ls, and then sales and client services to go to market with. I think you have to protect that. Particularly when you’re creating a, almost like an intrapreneurship model. You need to make sure that that’s cordoned off and has its own lane for resource access.
Otherwise, you will never make it above the line for all of the B2C business. I ran into this first at Rocket Lawyer, where I was hired by Dan Nye to build their SMB model. Then had some hard lessons there that I applied to do a better job setting expectations coming into Lyft.
Will: One of the…not failure modes we’ve seen, but I guess some companies are reluctant to admit how a very focused strategy is a good strategy. When even our mature scaling companies are looking at a new product line, they’re almost hesitant to say, “You know what, this is such a small niche customer base, but at least it’s a testbed to see where else we can go.”
How important is it to have focus in the very early stages for a very young company, or even for a scaled company, when you’re going into a new direction?
David: I like to really throw quite a bit against the wall to test those hypotheses that I create. Then we run experiments against them. Once you start to get some early indicators that this is something that looks like it has a strong probability of succeeding, then I’m doubling down on it.
I’m winding down some of those other experiments to make sure my resources are really directed in the places that I need them to be. It’s hard to do, our eyes get big, but I really think that you get maximum value out of your product organization, you get maximum value out of the brand you’re creating, and you get maximum value out of your install base and those reference customers that you’re creating…
When you are disciplined and really tackle one beachhead first. It’s classic Geoffrey Moore, “Crossing the Chasm,” kind of stuff.
Will: One of the things we’ve talked about, last night and in prep here, is when you dial all the metric back, all the stages of the company, it really comes down to the people within an organization. I think one of the things I really credit Lyft is in the last couple of weeks, as we all know, the country has really taken an interesting direction with something that impacts everyone globally and domestically, and that is with the immigration ban.
I credit your company for jumping on that in a very quick manner, and in a very unifying manner, with a message. That message wasn’t just relevant politically. It really seemed to be a rallying cry for the culture within your company. Culture’s very important because without it, none of this really matters.
One, I just wanted to acknowledge the issue at hand, acknowledge how impactful it is obviously here and everywhere. Also to credit you and maybe give you a chance to talk about how that has unified a bit of the message and the culture within Lyft.
David: John and Logan are the founders of Lyft. I’ve known these guys for a few years now. Actually, when I was at Rocket Lawyer, John and Logan tried to recruit me to come join them at Zimride, which was their predecessor company.
These guys have been focused on their mission and their vision, which is really about transforming transportation, improving accessibility, bringing down the cost, making it reliable, making it safe for the communities that we live in, and they’ve been trying to do that for over a decade now.
I didn’t join Zimride. They were telling me about Lyft, actually. This was August, 2012. John was saying, “Hey, David, this is gonna change everything. It’s going to change the world. Anybody could be a driver, and anybody can be a passenger. You’re going to be able to request a car, the car that’s just driving by on the road, and you’re going to be able to get it just through your mobile phone.
You’re going to sit in the front seat not the back seat. It’s a community that we’re creating, and when you get in, you’re gonna fist bump with this driver. That’s the kind of relationship that we wanna have.”
David: He’s like, “That’s not even the best part.” He runs back into the back of the office the office was probably about the size of the stage at the time, and he comes out with one of our big famous fluffy pink mustaches. He goes, “All of the cars are gonna have these on the front.”
Will: [sarcastically] What a great idea! [laughs]
David: I walked out of that meeting going, “This is never going to work. These kids are fucking crazy.” I didn’t join them, and then I watched them over time. When they got in touch towards the end of ’14, and said, “Hey, we’re working on this new strategy to take Lyft into the enterprise,” I knew these guys had a vision and a mission that was authentic.
They’d been doing it for 10 years, through thick and thin. Even before all the wild success that Lyft had. I think it really comes down to being very clear on their values. These values are really the tenor that Lyft operates with.
When you see your leadership across the entire executive team, humbly enacting these values every day, being yourself, uplifting others around you, making it happen, and creating fearlessly, it is really something that emboldens the entire community of Lyft. As a result, it’s what we hire for, it’s what we develop, it is what we prosecute on performance management for.
It is really something that we stand for. When that situation arose, I think that it was incredibly easy and swift, for John and Logan to come out with our stance. That’s really who they are, and they’ve been that way for over a decade.
Will: Have you seen in the various companies you’ve been at where values get in the way of performance?
David: Yes. I actually think what happens is that you have your stated values, which almost all of us have stated values, and then you’ve got your acted values, and I think that there is a values gap.
You might have a value that says that we operate with a sense of urgency. When an opportunity arises for that to be tested, it takes you, I don’t know, a day to get back to me. When I am trying to solve an urgent customer issue, and I need you to be responsive inside of an hour.
That is really something that people have to honestly evaluate and assess, and measure themselves against to figure out, are these values actually what we’re living every day?
Will: I think, I have to ask, that there’s another large ridesharing company out there…
David: [sarcastically] Is that right?
Will: What’s the future hold for Lyft? What direction are you really excited that you can hold up as a real competitive advantage and where you see the future of transportation going and how Lyft plays in it?
David: As far as transportation, I don’t think that we could possibly be living in more exciting times. You really have seen in the last, call it 15 months really, I would say you have seen every hardware manufacturer, every major software manufacturer, every automotive supplier and OEM has elbowed their way to the table to this…domestically it’s a two trillion dollar opportunity and globally it’s a 10 trillion dollar opportunity.
Really what we’re talking about is the transformation from a culture that is really car ownership centric, to ultimately being able to deliver transportation as a service. Doing that by bringing down the cost, making it more accessible, making it more convenient.
We, at Lyft, have laid out a roadmap for the future that essentially is showing this transition, that it includes today where we are of a ridesharing mentality, and in the next phase, really a hybrid of autonomous vehicles, where we believe in the next five years half the vehicles in our fleet are going to be autonomous.
In 10 years thereabouts, a decade, all of the rides that are on the Lyft network are going to be delivered autonomously. This is an incredible opportunity for us to be able to redesign and reimagine the cities that we live in. Today, the automobile manufacturers are spending $283 billion a year in the United States…marketing to us, advertising to us, that this is a symbol of freedom.
Yet it is the second highest household expense. Second only to housing. Ahead of healthcare, ahead of insurance, ahead of food.
Will: Ahead of youth athletics and soccer? [laughs]
David: [laughs] Soccer on the peninsula, for sure. As a result of that, we have American families spending $9,000 a year. Yet it is a terribly used asset. We’re only using it four percent of the time. There’s a better path forward and I think that Lyft has a really compelling, exciting vision.
We’re not worried about those other guys. We continue to focus on what we do best, which is take care of our driver community, take care of our customer community, and take care of each other at Lyft, to make sure that we’re delivering the world’s greatest transportation.
Will: Are you a one man band, a rock band, or an orchestra?
David: We’re somewhere between a few rock bands and an orchestra right now.
Will: [laughs] It was awesome. Just through prepping for this, I actually learned a lot, just in how you think about building businesses, leveraging your experience. It’s been a pleasure to have this conversation. Congrats on all your success. Particularly in the last couple weeks you guys are, as I said, really setting a new standard. A pleasure, David.
David: Thank you very much. I really appreciate it.