Startups come in all shapes and sizes on various stages of a timeline, yet it’s not surprising how many have the same questions and concerns about how to scale from x to y to z, the right time to hire and fire, and how to keep a team motivated during hard times.
At this year’s SaaStr Europa, Jason Lemkin, CEO and Founder of SaaStr, took the stage to answer the audience’s most pressing questions about the present and future of startups.
His answers didn’t disappoint.
Q: Where Should SDRs Report — Marketing or Sales?
Continuing the conversation on effective team members, it’s important to hire the right people to manage SDRs.
A VP of Sales might seem the logical place to have your first SDR team report. But if they’ve never managed a higher turnover SDR team, they often melt. It’s too much to learn on the fly for most new VPs of Sales.
The tactical answer —
Early on, SDRs need a lot of attention, oversight, and training, so the person in the room who has the most experience managing SDRs is the person they should report to.
Sales leaders who have only done inbound and responded to leads aren’t those people.
On the flip side, marketers, whether you call them SDRs or BDRs, are more of a demand-gen marketer and may have their own team.
But in reality, most marketers use them to qualify leads intelligently before passing them to sales, not for raw outbound.
The strategic answer —
Later on, folks usually end up with two teams — a classic outbound team that reports to sales but doesn’t do true pure outbound, and then marketing owns its own number and leads and often has its own team of BDRs to qualify leads. But in the early days, have whichever of your VP of Sales or Marketing has more experience managing SDRs … mange your first SDRs.
Hopes for the future
Lars Nielsen runs outbound at Snowflake (watch him here) and discusses the importance of creating an SDR opportunity enablement program.
Finding seasoned SDRs is a challenge because they want to move up in the company, but there are some unicorns out there who would stay if there was a pathway for them to succeed in the position.
Some people only want to be openers, and you should be able to pay them as much as a closer if they’re just as good.
As Nielsen says, “The hardest part of closing any deal is finding it.”
This isn’t really a thing in SaaS at the moment, so if you can find someone who has been outbound for more than three or four years and you can smell the passion coming out of their pores, give them a path so they know they aren’t stuck with a second tier pack.
Q: What Does It Take To Write A Great Cold Email In 2023?
Finding unicorn SDRs is one thing, but writing a great cold email is simple.
“Amazing, great emails that are perfect, that solve your problems as a buyer for real right now, or are a jaw-dropping investment, get opened,” says Lemkin.
You can read more about two cold emails Jason funded for millions and why many of the top VCs open cold emails.
The weird thing about CEOs, even at huge companies, is they open almost all their emails. They don’t open dumb emails or sift through the promotions tab, but if someone has a headline that solves your problem and says, “I’ve got the best candidate for outbound for you,” they will open it. Likely within the hour that day.
Amazing outbound works for sales and marketing and funds. The mistake mediocre people make is thinking a cadence will work, or a form email, or an SDR asking to pick your brain or buy you coffee.
What works is the email you spend two hours researching and solving their problem. It always gets opened.
Q: How Do You Get Sustainable Output In A Startup?
There are two types of people working at startups.
Option 1: You have a team of normal people expecting a normal job.
Option 2: You have a team of quirky people who are passionate about what they’re doing and willing to work to see it through.
“Overall, folks in tech have gotten lazy,” says Lemkin. “CSMs don’t want to deal with headaches. Everyone wants everything automated. So many marketers don’t want to own any number, or they hide in the middle of infographics and soft goals.
Then things got worse in 2021 because everything was easier. People worked less and phoned it in on NRR and marketing and sales to an extent.
They wanted a one-call close.
So, as leaders, you have to start from scratch and hire new people who weren’t trained in horrible ways or hire people who have been around long enough to know that sales are hard and deals can take six months to close.
So what’s the break line?
You don’t want people to work 10 hours a week. And some people say they want the first 1000 people to work 24/7 and never sleep.
You have to decide what kind of team you want. Startups aren’t normal jobs, so expecting normal output won’t help you expand.
Your First 50 Employees Must Be Pirates Or Romantics
Your first 50 employees must be pirates or romantics.
These are the folks on your team who live and bleed startups—the ones who know more about your product than necessary. The ones who left a restrictive environment, finally feel freed from shackles, and step in as owners.
“In the old days, only weird people worked at startups,” says Lemkin. “It was so quirky.”
But since startups came into the mainstream, normal people started coming in.
And you can’t build a startup with normal people. It’ll fail.
But how do you find the pirates and romantics?
The number one job for founders is recruiting.
At first, you recruit the initial team. Then, one person at a time.
And then?
You spend your entire life recruiting, so you have to be good at it, but you don’t have to be great at all of it.
Some people are good at creating excitement, while others have a sixth sense in the screening process to know what’s right.
Play to your strengths and let someone else play to theirs to find the right team.
Not everyone on the team really needs to be on your mission
But almost all the first 50 employees do
Hire pirates and romantics at least until you are truly ready to scale
— Jason ✨Be Kind✨ Lemkin (@jasonlk) May 22, 2023
Q: When Things Are Hard, How Do You Know When To Change Things Up?
One audience member shared how they raised a series B before growth stalled out. With a sales team of 12, including a VP of Sales, they asked whether it was better to find a new VP of Sales or top them to try and move the needle when only 3 of the 12 are meeting quota.
“You have to do it quantitatively and have a toughness factor to it instead of an emotional firing,” says Lemkin.
We’re in a phase change which means things get harder, so you have to determine whether you have a great VP of Sales, a good-but-not-great VP of Sales, or a bad-for-your-company VP of Sales.
Some questions you can ask yourself include:
- Is performance declining or still growing at a reasonable rate considering the macro changes?
- Is my VP of Sales agile enough to evolve the playbook? What worked 18 months ago doesn’t work now.
- Do I have a plan or strategy if I get rid of my VP of Sales?
Companies that get rid of a good-but-not-great VP of Sales without a plan or strategy typically go into a spiral they struggle to recover from.
The Takeaway —
Have a plan. Be very cautious about making a replacement if things are going ok in the current environment.
If you’re topping or leveling, always be 90% transparent and do what needs to be done.
Don’t do a stealth search. Instead, only bring in someone that person agrees is better than them and would help them do better.
Topping things can be stressful, but at the end of the day, you just have to do it and be 90% transparent about it.
Q: What Do You Think About Specialization In This New Era Of Efficiency?
Efficiency has been a hot topic this year, and understandably so.
“In my time in SaaS, we all went from light specialization AEs and SDRs. Then figured out we needed sales ops earlier. Rev ops became professionalized. CS became professionalized. Initially, the idea was efficiency,” says Lemkin.
“But what got lost around 2019 was that the team has to pay for itself.”
Things got heated in 2018-2019 and then overheated in 2021. So on a yielded basis, sales efficiency went way down.
If you have sales reps only closing 2x of their OTE, a whole team of enablement, and a wonderful rev ops team, you’re never going to get profitable on your customers.
The goal of these functions has been corrupted from when capital was free in 2021, and it was ok then if previously efficient functions only enabled faster growth.
But it wasn’t ok in 2018, and it isn’t ok today.
The Takeaway —
People need to specialize. Closers should close, and openers should open. When you have more than four or five reps, you need some type of rev ops.
But you have to make a spreadsheet and figure out what these people cost, and sales have to pay for it.
A simplistic way to look at it —
Revert back to sales closing 3-5x what they take home—at least 3x for SMB, 4x for mid-market, and 5x for enterprise. Attainment has to go up, and you have to pay for these resources.
If you’re not performing to that level, it doesn’t make sense.
Q: What Proportion Of People Do Everything Right And Still Fail?
Zero.
If someone is doing everything right, they won’t fail.
“Truly great founders that have a great CTO that can build amazing software and they do not quit and commit for years and understand a market, I’ve seen zero percent fail,” says Lemkin.
“I’ve never failed in my entire career,” he continues. “But I’ve almost failed every time.”
His first startup needed to be VC-backed. All the VCs pulled term sheets, and Lemkin couldn’t make payroll. There were two weeks left, so he went out and closed $6M of contracts and shipped out product in two weeks.
At Adobe/Echosign, he went 14 months without a salary to stretch while the other co-founder walked out the door. That other founder failed. Lemkin didn’t.
“My answer is cry me a river. It’s supposed to be hard. The best ones almost fail. UiPath took ten years to get to $1M in revenue. How many people would do that? He could’ve quit along the way,” Lemkin shared.
Startups are supposed to be for crazy people in the early days.
The Two Reasons Startups Fail
The two ways a startup can fail are:
- They give up.
- The CTO isn’t that good.
It’s too competitive today, so you can’t sell a mediocre product. A good CTO is a hacker and someone who wants to triple the output of their software.
Almost everyone has an almost failure story. The best founders bend the odds and turn that “90% failure rate” into … 0.9%.
