The Sales Framework Every Founder Needs | Mark Roberge

19:10Joubin:Crazy.

19:10Mark Roberge:It's changed.

19:11Joubin:It has changed. Yeah. I'll answer your question on the mo. Yeah. Yeah, I think like if we go down, people are getting fired and we're getting sued. Ah. Full stop.

19:27Mark Roberge:It's mission critical.

19:28Joubin:Full stop. If we go down, if we are running like HubSpot CPQ system, and it's the last day of a quarter, and Roadrunner goes down, and HubSpot misses their number, we're getting sued. It's literally in our contract. And by the way, the CIO and maybe the CRO are getting fired. Right.

19:51Mark Roberge:So it's almost like a CYA moat. It's like an accountability moat. And I guess if I can play it out, like when you were first describing it to me, I was a little like, you're a smart guy. You are way, I wouldn't expect you to like left here, but like it has a little bit of rapper feel to it because you said, okay, the model's advanced and you can like really do some cool stuff with the foundation model. But the reason, and I'm sure there's a whole bunch of other IP you build around it, but it's just not going to be production ready and no one wants to take that risk. they want to put that on you as a vendor.

20:28Mark Roberge:And I think like my personal, my foundational rooting of barriers to entry in Moat rests on Michael Porter's of Porter's Five Forces article he wrote in the seventies in Harvard Business Review, where he listed out the eight foundations of Moat, which I have personally interpreted for each evolution. Like I interpreted it for the SaaS era and I've now interpreted it for the AI era. And one of those was brand. Whereas like, why do you buy an arm or a suit where it's only 10 % better than what you could get at Sears? You buy it for the brand, right? And I think there's something to that when today, the big thing is like trust.

21:11Mark Roberge:And that's, I think what I'm feeling from you is like, hey, if Roadrunner is good enough for these folks, these folks, these folks, we're going to go with them because this is mission critical. and we know the products are all going to move fast and all these different things are going to change, but that's the one that we're trusting. And I associate that with the same metaphor that was used to discuss brand. I don't know if that's fair or what you're seeing it as. Maybe it's slightly off from what you're visioning for the business.

21:43Joubin:It's an interesting time to be a startup right now because on the one hand, you have a devil on your shoulder that's telling you the public markets are down 50 % because we believe that you can now build anything that you used to not be able to build before. Okay? So that's like part one. Part two is, is it that Anthropic and Claude's model will allow them or anybody else to build? Or is it that we just have a general mistrust that the incumbent is going to cannibalize their own business aggressively enough to move to a new world where they have to reset their architecture. Exactly. And if the answer is like, okay, well, is Salesforce going to move faster to cannibalize their own business before we get to distribution?

22:40Joubin:Are they going to get to innovation before we actually get to scale? or if the question is, well, is an enterprise just going to use Claude Code and just build this themselves? Exactly. And so I think like, as I think about moats, like what are the two things that you're fighting

22:58Mark Roberge:against? Yeah. I mean, that's the new one is you've always fought against the incumbent, but the new one now is the foundational model from below. That's the entrepreneurial riddle. That's right. That's right.

23:05Joubin:That's right. And like, in some ways I kind of go back to like, this has always been the question. Like somebody could always build HubSpot internally. Now it's just way easier now. Totally.

23:21Mark Roberge:But they did, I mean, Google didn't adopt an external CRM for the first like 10 years of their existence. They built their own. Right. Until they were like, this is stupid. Like why we're wasting good resources on this. and we could just benefit from, you know, the 10 ,000 customers of Salesforce or the 10 ,000 customers of HubSpot. It looks like it made sense. But you're totally right. The build versus buy, like, evaluation is completely changing now.

23:48Joubin:Exactly. So it's easier to build. That's fair. But you're still having to expend a bunch of engineers on something that, in CPQ's case, is just not very strategic to your business. Like, it's not like a core thing that you're going to productize and use for your business. And so I would say we in Silicon Valley probably overestimate people's willingness to want to build things.

24:14Mark Roberge:Yeah. Because you're around all these tinkering CIOs and CTOs that is not representative of the global CTO.

24:19Joubin:Yes. And so I guess like, you know, like at Roadrunner, we have a buy first policy. If there's something that can move us forward, let's buy it. we're busy building a bunch of stuff. If we run out of roadmap to build and I have too many engineers and I got to put them on something, I guess I'll start putting them on internal projects. But like, I don't know. I'd rather them be building features.

24:49Mark Roberge:Totally. Let me just devil's advocate. I agree with you. Yeah, yeah. And obviously as an investor in the application layer, I'm hoping that's true. But I just want to play it out with you as a super smart guy that you see all these things. And... I won't make the representation of a non-tech company if we're picturing the CTO of a manufacturing company, the CTO of a bank, the CTO of a hospital. I think that's a different beast. But let's say a CTO of a software company, whether it's in Silicon Valley or Europe, whatever. And they're looking at it like, okay, I'm growing out of this SaaS era where I have all these functional apps with functional databases, and I can't get real, like i can't get a lot of the insights i need because my data is in different databases it's very hard for me to like tell product what to build based on the calls that are happening in sales and customer support because that transcends three different databases and also like i i've operated a servant leadership mentality in the cio office over the last decade which is like a bring your own app.

25:58Mark Roberge:If you're a 23 year old SDR and you want LinkedIn sales navigator, fine, test it out. And if it works, we'll adopt it. And now I'm sitting on 172 apps that don't talk to each other. And it's a pain in the ass. Now I have a team of 17 IT people just to like, keep all this stuff going and integrated and then, you know, all that kind of stuff. And like, I'm learning from that. I'm going to move all of our data into, you know, like Databricks or some sort of data lake, I'm going to stick a foundational model as my like cross, like horizontal glean oriented, almost like operating system. And for the most part, I'm going to use my, repurpose my 17 IT people.

26:41Mark Roberge:I might have to like replace some of them. But the people I need in my IT group to like build like agents or whatever on top of this to run our business in a very horizontal manner, are not qualified to be on my engineering team. So I'm not trading off from the engineering budget. It's the static IT budget. In fact, it probably goes down. And now I end up in a better place. I kill the functional divides. And I don't have to maintain all these things. And God forbid, like, some new architectural advancement occurs. I can plug it in. I don't have to wait for my vendor to do it or be stuck in an annual contract in old architecture.

27:21Mark Roberge:Believe, remember, I agree with you, but that's the devil's advocate.

27:25Joubin:I think it's the topic du jour right now. Let's just take CPQ as the example because that's what we're talking about. Let's just imagine we have those 17 IT people that can go do this with Claude, okay? First, we have to assume that Claude, not them, can build the data model from scratch. then we have to assume that Claude maybe with them can go rebuild all of the pricing and rules engine from scratch and be opinionated on what good should look like given your own environment okay then we uh should assume that Claude will build uh the the agent with like a fanned out architecture that's task specific, which I believe it can probably do, that lives on top of our data model ontology that then interacts with all of these unique engines.

28:24Joubin:Okay. So let's just assume we can get past those three things. Okay. Then assuming we've done that, then CPQ is unique because it touches IT, deals desk, rev ops, sales, finance, minimally, just to get from a quote to a deal approved to the customer. Okay. So then in those cases, you have to understand the unique workflows of each of those people and build and design for success within all of them, because they all touch this thing. And by the way, if it uses the lowest common denominator, the model to figure out what have previous CPQ solutions done, I mean, no shade to previous CPQ solutions, but it's going to give you the same shit, which is going to be like some tool designed for IT and rev ops that sales absolutely hates.

29:13Joubin:So, okay, let's just assume we can get past all of that. Assuming we've gotten past all of that, then you need to do the integrations. Those integrations need to reach into your billing system and your CLM system so that the red lines, as well as like when you want to do an amendment or renewal are right. And by the way, if they are wrong and you send it to a customer, you get sued. And so at the moment of approval, at the moment of sending it out to a customer, there's all sorts of legal complications to make sure. And by the way, let's assume all of that goes well and you are a company that has a few thousand salespeople.

29:59Joubin:It needs to be perfectly load tested and make sure that all of the right people are in they're at the right time. And when inevitably somebody leaves, we know how to fix it. Maintenance is completely taken care of along the way. And, oh, your CEO wants a new pricing model in the next two months that's like AI-based, token-based. Somebody has to go back into the cloud code base and figure out where was that part of our data model, reintroduce it, do all of the user admission testing on top of that. So I'm not saying it can't be done.

30:41Mark Roberge:No, it's a wonderful argument. You just have to believe a lot of it. I feel so good now as a VC and startup advisor. I was hoping you'd make such a strong argument.

30:51Joubin:um but um you know what i think about is again i'm biased obviously like my like my career is betting on this thing

31:09Joubin:today cpq is in my opinion an extremely misunderstood space and it is um it has a like a negative feeling because the companies before us have never broken through and um i think uh that won't last like i remember this with glean everyone was like enterprise search i don't get it

31:34Mark Roberge:because there probably was a cloud first version in 2010 google was trying to do this right

31:40Joubin:everybody was trying to do this and you know uh all all the credit to mamoon yeah was like I think the time is now. The technology is here. The founder is here. We can do this. And eventually, because of their own success, they catalyzed a lot of smart people, Anthropic, you know, like Perplexity wants in, OpenAI wants in, Microsoft, to start flanking them. Now they're fighting every flank. And so, you know, either I am wrong and this market is what everybody else believes it is, in which case, shame on me, or I am right. And in probably one to two quarters, it will become obvious to everybody else what is obvious to me.

32:32Joubin:And then we will have the same problem as glean which is that we are fighting all these flanks but in our case uh we have they have all the same tools that we do they have like opus four six or whatever and so you know the race is really on then uh now do they know how to get to the enterprise do they understand like how to sell yeah like do they know how to like get multi-threaded into an organization I don't know. Do they have the brand and the credibility to be able to go where I believe the pain is? I don't know. We'll find out. But that's the game on the field right now. Amazing, man. I'm so psyched to see you playing in that game.

33:11Joubin:That's the game on the field. It's insane out there. Yeah, exactly.

33:15Mark Roberge:It's crazy.

33:15Joubin:Do you ever want to go back?

33:17Mark Roberge:To? Like operating? Do you still have it? I think we've talked about that before. Do you still have it now? Like, do you ever see a portfolio company? I don't think so. There's a lot of dimensions to it. rich well first off i've had like crazy offers um which are so tempting but then number one i just like you know i have a thousand people that have i'm managing their money and their their venture piece that i have an obligation to a commitment to so right there there's a bunch of obligations and relationships that like when you when you take that step you're committed to it you know adventure is not one of those things you can just like go in and like do three different plays over, you know, and then just personal wise, um, uh, you know, my boys are still like, uh, they just have some stuff that, you know, I can, I can be heads down hardcore on work, but like, they still need a like really close dad too.

34:19Mark Roberge:And I think for some of those bigger roles that I've been offered, the expectation would be different. It would compromise my holistic existence. Just because you can grind the same number of hours, but it's different when you're running a global sales team than when you're running a VC firm. Totally. Right, in terms of different flexibilities of where you are. Totally. So there's just constraints in my existence, and I don't think it's my calling either right now. Good. I think there's something about And you know me that I'm constantly paranoid and reflective on the unique gifts I've been given and what those gifts are, how I'm supposed to express those to create value for society.

35:06Mark Roberge:And I don't think an N equals one is the right path on that now. I think I need to be sitting in the patterns. I've fallen in this really blessed, cool, and accidental professional flywheel right now, where I'm not sure where in the flywheel point we start. But let's say that maybe like, okay, I go through a month and I'm sitting in seven board meetings. I'm like, oh, damn, I see the same thing. Same issue, founder misstep. and I'm like, oh, like coaching through it works. I'm like, oh, cool. I should probably talk about this. And so like Lemkin says, hey, Mark, you do a speech at SAS for a share?

35:46Mark Roberge:Yeah, sure. Got a couple of things I'm seeing. So I just talk about it. And then like a piece of it goes viral and someone's like, hey, can you write this up? And I write a blog about it. And then I'm like, oh, this is kind of cool. So we'll start investing through it. And then I'll be like, oh, I should probably package this up into a class and I'll talk about it at Harvard. and then like 400 students from all over the world, from every single industry, bane on it. Hey, like I sell pharmaceuticals in Japan. I sell tractors in Brazil. Like how does this apply? And then it makes it rigorous and then it circles back into the portfolio.

36:24Mark Roberge:You know what I mean? So there's like this. So cool. This is where I'm at. I didn't wake up and be like, I should like try to go start a VC firm, get a professorship at a great school and build a platform so I speak and write all the time. It's just where it all came together. And there's plenty of people that, there's some people that do all of that, I guess, but it's fairly unique. And it creates a unique value add. And I like it. That's awesome. Thanks.

36:54Joubin:You wrote a new book. Yeah. Congratulations. Thank you. How's it doing? Great.

36:59Mark Roberge:It's been number one on Amazon in the biz dev category almost all month. Um, a hundred percent of the proceeds are donated to mental health. So I'm very psyched to see the checks coming in and that's going to go to some great soul food as well. Um, it was like, as, as kind of a theme we see here is I don't wake, I never woke up and was like, I should write a second book. you know this was just like the first one i never intended to be an author but with this one it was like finished the hubspot ipo you know took the faculty position at harvard had this five-year time where i was teaching and like doing a ton of startup boards from the the partners that invested in in in hubspot from like sequoia and general cosmos stuff and and that was the the moment in my career where something you've lived through is you see you have pattern recognition and after five years of doing that i was like why worked with like 15 or 20 of these one did an ipo one exited a billion two or valued a billion a bunch are flat and a bunch are bankrupt why and i kept reflecting and i'm like these were great products and great teams and the only thing they did wrong was they scaled their revenue at the wrong time and the wrong pace.

38:23Like the,

38:23Mark Roberge:I was like, I was like going back in my mind, like, when did they make that decision? How did they make that decision? That's a very critical decision that deserves like a, like the same rigor we take in building our income statement and like thinking about product management, like 101 and it's kindergarten. And so I started framing how a founder could not use the data that some unicorn did 10 years ago to make the decision, but to use their own internal performance data, which really should be the origination of these two key strategic decisions of like, when are we ready to scale revenue and how fast?

39:09Mark Roberge:And this does not mean slow down or do it to wait. Half the time, I feel like they do it too soon. Half the time, I think they'd wait too long. Half the time, I think they're going too slow. Half the time, I think they're going too fast. This is not like one way or the other. It's just do what's right for you and optimal for you, which has nothing to do with what Snowflake did in 2015. So that's what I started working on. I took it through the flywheel. I did the speech and I wrote an article about it. And then I did the speech for Lemkin in 2019. I think it was the most watched speech for a number of years for Sastra.

39:43Mark Roberge:Turned it into a case at Harvard. Everyone baned on it. We started the stage two capital with this methodology as one key point to drive go-to-market value add to the ecosystem. So then we got a hundred portfolio companies to ban on it with and cycle, cycle, cycle. and then Stanford two summers ago was like, hey, can you write this up? And I'm like, yeah, I think it deserves a book because it's been eight years now and it's still just as applicable. So I feel like there's some timeless element to it. And people are using it, whether they're selling software and Silicon Valley tractors in Brazil or pharmaceuticals in Japan.

40:19Mark Roberge:So it's abstract and that's a book. And I have a cause, mental health, and I can just raise some money along the way. So that's where it is. It's a book about how to use your data when you're bringing a new product to market, mostly in a startup context, but it applies if you're a$10 billion company and bringing a new product to market, on how you can determine when to scale revenue and how fast. And what are the core tenets?

40:45Mark Roberge:So in terms of the first question, you need product market fit, then go to market fit. Now on the surface, that's like, oh, duh, this is like very loose.

40:56Mark Roberge:But we have to break those down Because when you go out and ask like 20 entrepreneurs, what is product market fit? You get 20 different answers. You read the Wikipedia page, it's five pages long. And half the answers are, it's a feeling. That makes me uncomfortable. How's the revenue? Hey, CFO, how's our cash flow? Feels good. Mm-hmm. You know what I mean? And then when you ask them to quantify it, most of the answers are X customers, X revenue, tons of inbound demand. My opinion, wrong, wrong, wrong. But it's just like first principles, product market fit. If you base it on revenues or customers, it just means you can sell.

41:47Mark Roberge:You and I can sell ICE to Eskimos. I don't think ICE has product market fit with Eskimos. where you have a ton of inbound demand, it means you're good at marketing. I think the ultimate judge and jury, if you think quality of the product market fit, you have a product that when you put it in a customer's hands, it creates the value you promised. That's what it is. Creates the value. And to quantify, it's customer attention in the world we live in. They bought the product. They used the product. They essentially re-bought the product. Best quantification. Not perfect. but the best. And the issue is that's a lagging indicator.

42:26Mark Roberge:You're, you're, you know, you're

42:29Joubin:running your, your gig. I'm making decisions now that I won't have the data for until a year. Yeah.

42:33Mark Roberge:You can't go to Mamoun and be like, Oh, great news. Like I read Mark's book. I'm going to get product market fit first. He says, if I have 90 % customer attention, then I have it. And then I'll move on to go to market fit. And good news. I signed up five customers. So now I'm going to wait a year to see what their attention is. So hence the, now we're getting into some of the uniqueness where you have to figure out, you have to define your leading indicator of retention. This is like a really important entrepreneurial to-do task that I don't think a lot of them do. There's been forms of this thrown around in like the PLG movement, something called the aha moment.

43:15Mark Roberge:I think Facebook had a famous one on the B2C side, I had like seven friends in the first week. Good, but like the issue is like, that's like a one-time thing. What I'm looking for is something recurring, okay? So qualitatively, what can you observe in the first, say, month when a customer signs up that if you observe that, they'll retain and be with you forever? And if you don't, they're probably gonna churn. And I try to take it one step further to make it easy to frame. by narrowing it down to three variables. P % of customers do E event every T time. P, E, and T. Okay? So let's bring that to life.

43:54Mark Roberge:Slack, pretty well-documented examples out there. 80 % of customers send 2 ,000 T message every month. I love that. Like imagine a founder of Slack in year one, like five engineers sitting around the room. We got the MVP out. All right. our first North Star metric is to get to a million in revenue. Let's go. Picture all like the actions that occur. Versus, all right, our first North Star metric is to get 80 % of our customers to send 2 ,000 team messages every month. Different set of actions. Way better business. like the first slide i want to see in the board deck is that where are we at the first slide i get is an income statement that shows them how much they spent on copy or ink last month and yet there's nothing in this deck about customer success happiness engagement right hubspot was 80 of customers use five more features in the platform every month you know we could talk about like a dropbox 80 of customers do a signature every week whatever or like back up their device every week.

45:12Mark Roberge:So yeah, that's the breakdown is step none's product market fit. Product market fit is not a revenue or customer line. Product market fit is continually creating value for your customers. It's quantified in the lagging as retention and you have to create your lead indicator attention to know that you have it month over month. So step two is go to market fit because a great entrepreneur you should not be working in product market fit on optimal pricing, sales quotas, commission plans. That's like any number five. We're just trying to frigging get a handful of customers signed up every month and them seeing value.

45:56Mark Roberge:The best entrepreneurs do unscalable things and onboard the customers themselves. Not scalable. We're not setting up a cold calling program. We're just trying to make that happen. Once you have that, you're not ready to scale because you have to get go-to-market fit. And all that means is you can consistently create that value that you proved in product-market fit profitably. Not gap accounting profitability, but you in economics. So like the revenue and the cost, the cost that grew up with revenue. That's when you now you have to build at least one scalable demand gen program. You need a sales playbook.

46:34Mark Roberge:You need to figure out your optimal price, your optimal commission plan, your optimal quota. And that's like, you know, it takes two or three reps and we're going to do that. It could take a week, a month, two months. But we want to check that off before we start adding 20 reps a month. So hopefully that gives you a little bit of like a quantitative, more rigorous approach to deciding when to scale using your data. Not when you raised a big round because of your revenue traction. It's when you have product market fit and go-to-market fit. You need to do those in sequence because you run the risk of optimizing the go-to-market on the wrong product market combo.

47:15Mark Roberge:And you need to instrument them with quantitative leading indicators so you can tell every week whether you have them. Do you think that, do you want to use your company as a case? Sure. I don't want to turn you off of your amazing interview capabilities, but I don't know if you want to do that.

47:35Joubin:Sure. Do you have your LAR? I feel exposed, but I'm happy to try. I would say there's only two goals that matter this year for us, and those are the goals that I've set out to the board. The first is a top-line revenue number, and the second is the time to first quote. that an AE creates a quote in Roadrunner. Boom. These are the only two metrics that I measure this year. I love it.

48:06Mark Roberge:Okay. That's it. So I love that. You're way ahead of the founders I see. My only, you've exposed like a, it was a lagging iteration of like the LIR definition, which is the way you've defined, if we say that time to quote is the LIR, not perfect because it's not ongoing. there are customers that like disengage and essentially you've lost product market fit if a lot of that happens. So that's all we have to re if it's okay with you, we have to reframe it to like, you're saying if they AEs are quoting out of it, it's not precise enough to be able to know,

48:49Joubin:like, are they quoting more? No, no, that's okay.

48:52Mark Roberge:That's okay. It's more like it can't be the way you did it was P % of customers do E event by tee time. So I want to have them do a quote within a week. We just have to slightly tweak it to be like 80 % of customers average two quotes per month or one quote per week every week. We measure forever. Because we want to make sure and check that they don't unengage. This is not like a tripwire.

49:26Joubin:But the unique constraint in my business is these are, like, I almost feel like the only thing that I want us to care about. Because, like, an integration is so hard. There is a graveyard. Yeah, I got you. So all I want, like, let's sequence them where I'm like, hey, this is the only thing that matters right now. Right. Then show me that we have gotten like five customers that have gotten AEs on the platform in this time. Okay. Yeah. Then we can.

50:05Mark Roberge:All right. So in the book, we're getting into the details of that paragraph on LIR definition. And it talks about three phases of evolution that sometimes you go through where the first phase is like in the beginning, easy, but like everything's hard in the beginning. And then you could graduate all the way up to like the expert level. The first LIR, if you really want to break this down and sequence it, is a setup LIR. And that's essentially what you're saying. Like I just want them, how quickly can we get the first quote? That's great. Let's start there. And we can just measure how many of our customers are set up and not.

50:40Mark Roberge:Boom. Once you get really good at that, you probably want to graduate to an engagement LAR, right? Which is going to be whatever the number would be, two quotes a month, whatever we want to say. What percent of our customers are -

50:53Joubin:Yeah, or X percentage of AEs are using Roadrunner by a certain period of time.

50:57Mark Roberge:Well, again, I'm a little concerned about by a certain time, just every, the continual usage, right? So that would be the engagement. And then sometimes people graduate to an ROI version. Like in HubSpot, it's like, instead of saying, use five or more features in the platform, the ROI version would be they experience a revenue or lead lift by X percent. So I don't know. In yours, it would be like, I don't know, CAC? Like closure? I don't know. It's a tougher one. You don't have to go there. I don't encourage everyone to go there, but it's just like an advance. And you can measure all three. Yeah.

51:33Mark Roberge:Okay. Yeah. So you have that LAR that's beautiful. Now, the one cool thing about that, that a lot of people don't exploit, that you're kind of at the stage you can consider, is we've talked about on a separate front, retention has been a killer to so many software businesses over the last two decades. And I've had to parachute in to attempt to fix retention issues at lots of companies. and instinctively most people think the retention causes product deficiencies or customer onboarding deficiencies that's the minority in my experience it's mostly a sales issue because like we haven't set up the structure to keep sellers disciplined in going after icp customers and setting good expectations and like, and also setting up customer success, um, appropriately.

52:36Mark Roberge:A classic example is whether they get it involved. And this is kind of important for you, for your context, because there is like, it sounds like there is a, an internal setup. If I was an A year company, I could close a business without talking to it. I just effed over CS. Like that it team's going to be like, oh yeah, by the way, we just bought something. We just bought the road runner and we just need you to spend some time. They're going to be, they're going to politically try to kill that project versus if I just had the like, um, uh, empathy and respect as a seller to get it involved, because that's better for your company, better for your CS team, better for that customer.

53:23Mark Roberge:I probably triple or quadruple the likelihood of a high LTV account because I had that respect. But that, if you're incenting a rep, just be like, I'm paying you on revenue per quarter, they're not incentivized to do that. So if we zoom out for a second, you want to make sure your comp plan is not just comping your rep for ACV, it's comping on LTV. And the LIR presents an opportunity to do that. Let me just finish real quick, Jim. You can comp them 50 % on the contract signature and 50 % on the LLR. I'm not trying to turn them into a customer success manager. I'm just trying to make them sell the deal right.

54:05Joubin:Yeah, that makes sense. But if you compensated a sales rep for expansion at the same base commission rate that you compensate them for net new, assuming you have expansion opportunities inside of these accounts, does it not accomplish a similar thing?

54:21Mark Roberge:It helps you, but I don't find that reps are, it gets back to where we started our conversation today. They're not long-term planners. You're absolutely right if they were long-term planners, but they're just trying to make their quarter to keep their job. And if they had to choose between X or Y, then they're like, okay, I'll eat in the shorts in a year when I'm expanding less. The LIR pulls it forward to be a little more, like they little cut their paycheck in half. Okay, so you're absolutely right. And I strongly encourage, like we can go through a whole decision tree on whether you should keep your reps as expanders or move that into AMs.

55:01Mark Roberge:That's an important decision. And that helps if you have that context. But, you know, just if you want, try the LIR approach. It works really well. Really cool. Okay. So let me just kind of just lay out the last question, which is like how fast. So I think we got some nice clarity around when to go. I think every founder can now use their own data to make a decision. And I'm not saying like it needs to be perfect, right? Like there's dimensions of like how much you have to blitz scale relative to your context. If you're a glean and you know you're fighting against, you know, like anthropic and open AI trying to go in here, you're taking chances.

55:42Mark Roberge:You're not doing 80 % of the customers do e-event. You're doing 40 % of customers. You're taking chances. You're not waiting until your LTVC gets to three. You're getting your LTVC gets to 1.8 and you're hoping it goes up. You're taking chances. But if you're bringing an AI-driven ultrasound mobile product to hospitals that has a huge moat, not as much competition, and is life-threatening, you're just going to get an iron proof a little more. Right? So that gives us a little quantitative scaffolding to figure out where we are in that dimension. Now we're like, okay, cool, we're ready to go. You've seen this a million times.

56:25Mark Roberge:It's like, all right. Like... Even if they had the rigor of like, yeah, we ran it through a Bayer's side scale, and we have the PMF, we have the GTMF. ready to go. And it's like, oh, cool. Like, let's go to Kleiner. They'll give us like, you know, 15 mil, we'll do the deal. And then they're like, it was great. It was awesome. Like, and then they're like, oh, now we have to go do it. So they're like, they whip out their spreadsheet. They're like, okay, cool. We got to expand 20 mil. We got two reps here at the company. They've been producing, um, you know, a million each. So they'll produce two.

57:02Mark Roberge:We have a gap of 18. We have to hire 18 reps. Let's go hire 18 reps next month. That's how everyone does it.

57:14Mark Roberge:Total failure. Unnecessary failure. Do you know how much demand, Jen, you need to like, even if reps are doing it themselves, ramping the rep to manager ratio, even just the recruiting muscle. like one way to quantify higher quality is how many people you screen per hire if we want to keep that at 10 to 1 we need 180 qualified candidates in a month it's not going to happen so you don't think about scale as a one-time hiring event after a fundraise or at the beginning of a fiscal year you think about it as a pace so instead of saying we need 18 reps in January, you say we're going to hire four a month or three a month.

58:03Mark Roberge:Let's try to get the math close. So let's say instead of 18, we're going to do two a month, six a quarter. And now you've set up a pacing to experiment whether you're too fast or too slow. There's a hypothesis. Is two a month right? I don't know, but let's figure it out. So let's hire two a month for six months. And then you know what we do? We go back to our product market fit measure and our go-to-market fit measure. If those are green, if we've added two reps a month for the last six months and all those product market fit lead indicators are still green and all those go-to-market fit indicators are still green, let's go to four reps a month.

58:48Mark Roberge:If they break at any moment, stop fix it hopefully a day maybe a week god forbid a month god forbid a quarter fix it and guess what you know it broke nine months ahead of your peers because your peers what they do is they wait to the board meeting so the q1 board meetings happen six weeks after q1 in mid-april they sit down with the board we missed our revenue we missed our churn damn it well first off what they do is say speed up which is like just that causes bankruptcy you're just you haven't fixed the problem you're like covering it up but even if you were smart enough to say fix it you what you just reviewed was the results of sales from six weeks ago which is the results of the sales activities from six to nine months ago but when you have it instrumented with lead indicators you know that moment and you can intervene fix so just intervene fix get back on track.

59:46Mark Roberge:Now we go four reps a month for six months, stays green. Then we go eight reps a month for six months, stays green. Then we go 16 reps a month for six months. And now you're glean in a very calculated way.

1:00:02Joubin:And do you think that if you're a, do you think that there's an underlying problem with the headcount planning in general? Meaning, like, if you're a technical founder, do you think you understand this more crisply when it comes to engineering versus sales?

1:00:26Mark Roberge:I don't know. Like, I haven't, like, looked there otherwise, other than, like, we can't throw bodies at the engineering problem. That doesn't always work. I'm not an expert in there. Yeah. I don't know if they're falling for the same things. I mean, I think to some degree. Like there have been people like, oh, like with a huge roadmap, let's hire a bunch of engineers. Like, oh, that was terrible. Our productivity actually went down. When we fired a third of the team, our productivity went up. I hear those things. I don't understand. That's not my field. So maybe, I mean, you can answer that for me probably better.

1:00:55Mark Roberge:Do you see it parallel? though?

1:00:57Joubin:I would say

1:01:02Joubin:like at Roadrunner, we tried to do a headcount planning exercise like at the end of last year and I'm like probably 10 minutes in. I'm like, guys, me and my co-family, this is stupid. Like, let's like, let's work backwards from we think this is what we're going to do at the end of the year, but But in order to get there, we probably need, what, two to three engineers a month? And they're like -

1:01:30Mark Roberge:When you say get there, that was a product roadmap then? Roadmap, yeah. Yeah, cool. Got it. Roadmap. Perfect. Yeah, great.

1:01:34Joubin:Yeah. Like, we think this is what we want to do by the end of the year. Yeah. Here's all the things that we need. Okay, two to three. Let's revisit in March, April. They're like, yeah. But there's so much pressure for us to deliver a capacity model that worked backwards from the funding that you just raised. Exactly.

1:01:58Mark Roberge:Because you got to get to the next funding. There's an insane amount of pressure. Right. Okay. So let me try to take an attempt at making it a little more math and systematic. okay and i have a high degree of conviction that this is your entire go-to-market um spend and i think you could apply it to the rest of the org as well but you don't have to and i call it the stay or go or slow framework so it's kind of a a poke at annual planning in startups which is i think broken because they'll put together the plan in if they're good november december Unfortunately, so many people put together in January and like you're effed because the year's like half over by the time you get hires in.

1:02:41Mark Roberge:But like, let's say we put it in November, December, and we're like a series A company. So we're still in like rapid learning mode. And we're like, you know, we'll just, we're going to add like, you know, 10 reps a quarter and go. And then now we're sitting here and we miss Q2. We're at the July board meeting and they're like, oh, you missed. Hire more people to catch up. Why? like we put together this plan in November that was just a guess. Like the business is speaking to us. We need to be running our business based on how we're performing today, not like a plan we did in November. So that's where I encourage folks to do the stay or go or slow model, which allows you to plan four quarters out every quarter, which systematizes the learning pace that we need from that high level.

1:03:36Mark Roberge:So essentially what it would work is like you sit down, fine, put your annual plan together. You need that. Like we need to know like we're going to be like, at the end of the day, we have to like win the race to get to the series B. Like that's a pressure. And so like let's sit down and put the plan together and then let's agree as a board and founding team. What would we see after Q1 that would make us say, we need to go faster. Things are going great. We're checking all the things, green, green, green. Let's go. We thought we're going to do four reps a month in Q2. Let's go to six because it's go.

1:04:10Mark Roberge:Or it's like, you know what? It's unfolding pretty well. Not like green, green, green, but like green, yellow, green. So let's just stay. Four feels right. Let's stick with the plan in Q2. Or it's like LIR is getting crushed. No one's using the product. Two thirds of our reps are not heading goal and we were supposed to hit 10 meetings per rep per month and we hit four. If we stay on this plan, we just increase bankruptcy rate. We have to shut this down for one month, fix this thing, emergency board meeting on May 1st, hopefully we can get back on track. And then we reset it four quarters out.

1:04:49Mark Roberge:So it's not like you have to make up for this fictitious annual plan. It's like, okay, we crushed Q1, we're accelerating, we're resetting the plan four quarters forward. This is the new year over year growth from Q1 to Q1. And then in Q2, we green, green, green again. Beautiful. We reset again and with the Q2 to Q2 rate. And obviously that's just dictating if you're growing through a sales team, your sales hiring pace, which dictates your CSMs. If you're using SDRs, this dictates your SDRs, your sales managers, all that kind of stuff. And if you wanted to and you want to say, I want to spend 40 % on go to market, 40 % on R &D and 20 % on G &A, you can let the rest of the funnel thing to go too.

1:05:32Mark Roberge:So if you hit the go, that increases engineering hiring as well. I don't know if that's right, but you can do it that way. I do have a lot of conviction on the go to market piece.

1:05:40Joubin:You know what's interesting? I was with Brett Taylor doing this last week. And by the way, like in my pantheon of who I believe is greatest CEOs in the Valley right now. he's amazing and one of the things that like

1:06:00Joubin:one of the things that he that we talked about was he basically built like a pretty senior exec team basically from the jump so like his head of sales is like pretty senior and I'm like you know that's ballsy usually fails but for a guy like that and i'm like yeah usually fails but you know i think they just announced it took them six quarters to go from zero to 150 million of ars and i'm like outlier outcomes only happen when you make outlier decisions because like that defied every pattern that I knew. Yes. I'm like, red flags everywhere. Yes. But in his moment in time, given who he was, given the market opportunity and the early signals that he saw, he was like, we're going for broke.

1:06:59Mark Roberge:It's great. I think it's great. And I think it exposes, I think, why I, if I can attach it back to the work. And it's like, because I just believe the 85 % pick a study failure rate of a seed funded business startup is like not systematic, but it's because a lack of scientific rigor on the scale process. And I think what he's created or saw, and this occurred in the early days of Google and the early days of OpenAI, which was an extreme accomplishment of product market fit out of the gate. And when you have that, If you put the awesome team around to create go-to-market fit, you will go from zero to 150 mil.

1:07:46Mark Roberge:The problem is that because we haven't studied the scale fundamentals, we think everyone has that and they don't. And so sometimes it works out because you have it and sometimes you don't and you've got to adjust your process accordingly. That would be my feel for it. Because I think like everybody stands up those like one in a hundred plays and tries to fit everyone else into it without the appropriate analysis and contextual comparison.

1:08:13Joubin:Totally. And I think there's like a lot of pressure right now because if you're like an AI native company, you see companies like Sierra and Harvey and blah, blah, blah, all growing this fast. Exactly. And you're like, all right, I'll just like hedge and I'll pick half their growth rate, which by the way, half their growth rate is still unprecedentedly faster than anything we've ever seen before. Totally. And then you invest towards that.

1:08:34Mark Roberge:Yes. And also, I think part of that issue there is having looked under the hood at some of those companies, it's not all clean living.

1:08:45Joubin:Like the contracted ARR type stuff? Well, there's a bunch of stuff.

1:08:49Mark Roberge:Like if we just attach ourselves to product market fit and go to market fit, if they looked at the LIR, it is not good. A lot of these companies are distributing through a PLG distribution model that was invented at Dropbox in 2010 that is being adopted by SMBs and frontline ICs that are just switching between tools and taking advantage of an experimentation budget as opposed to a production budget. and then on the go-to market front, there's like no cap on burn ratio and realisticness around your economics. Yes, sometimes it's there, but in a lot of cases it's not. And so nevermind like the circular revenue redundancy and all the other issues that are occurring.

1:09:33Mark Roberge:So yeah, there's some gold in there, but there's a lot of like Groupons, WeWorks. Mm-hmm.

1:09:44Joubin:Yeah, it's, um,

1:09:51Joubin:the, the, um, I think what, if you're a founder and you're listening to this,

1:10:04Joubin:on the go-to-market side, one of the hard things is that you're probably going to think like, eh, but I'm Sierra. You know, like this one doesn't apply to me. Sure. Because I'm the exception. They're definitely thinking that way.

1:10:26Mark Roberge:So let me just like, fine. Let's answer this question. So fine. You, these rules of scale do not apply to you. Yeah. Because you're an awesome product person. You've built the best thing ever. Um, let's just talk about like how much you're going to burn next year. I think we can all agree that 20 billion is too much. And I think we can all agree a dollar is too little. What's frigging optimal and how the hell are you coming up with that? Let's just use a little science. A little math. Not some other company that's contextually different.

1:11:09Joubin:Yeah, but you know why people don't want to do that right now? Because money's falling from the sky. Both venture money and AI budget. Totally, bubble. And they're like, what do I care? I'll just go raise another round. It's so safe. I'll just go raise another round.

1:11:27Mark Roberge:It's so safe. It's like, dude, just roll. Raise the round. How dare you? It's not a bubble. The whole economy is going to change. It's so safe. And even if it implodes, it implodes on everyone. It's just not sexy to sit there and be like, yeah, I'm not taking the round because I'm trying to build a real business that I think will be durable. That's just not sexy.

1:11:54Mark Roberge:It's like I'd rather just go for it and there's a 5 % or 10 % chance that history is different this time. And God forbid that history takes place and we go through the Gartner growth curve and the 150X valuations return back to 10. And it's like, yeah, I'm just like everybody else.

1:12:15Joubin:Yeah, it's...

1:12:20Joubin:If a tier one comes to you

1:12:25Joubin:and is like, take our term sheet, you know it's

1:12:34Joubin:this happened to me like by the time this episode airs we'll have announced our series A boom founders funds leading it

1:12:43Mark Roberge:congrats, I might be the first one to say it on like a public forum it's an honor, thank you

1:12:48Joubin:and we'll announce it in a few weeks and we were like on the precipice of closing like some monstrosity deals like big, like multi-million dollar deals. Great. Like we just started.

1:13:03Mark Roberge:That's where you have to go. That's more durable. We can break that down. We haven't done it. It's beautiful. I love it.

1:13:07Joubin:And I got calls from like, we just came out of stealth. You could see the engineering team that we were building. The signs were there, especially in a space as boring as ours. Like the engineering team is insane. And I got a call. I got like a few calls from the usual suspects. And I told myself, if I get calls from these people, which are like the greats, I will take the meeting. Great. Famous last words. So take the meetings. And I thought the valuations were fine. I wasn't optimizing for valuation. I was optimizing for partner. Smart. And ultimately, I was like, we have the seed. We have money.

1:13:54Joubin:We don't need the money right now. I'm going to wait. I'm going to wait. I'm going to wait until these deals close. I'm going to give us a little bit more time. I know the minute that we announced this fundraise and it's like a like a founder's fund plus Mamoon and Trey, like that story comes out. Like it's like, it's so on. Every expectation in the world is on you. Every employee wants to ask you for a raise and this and that, like, you know, like real things that actually happen when you raise money that aren't always good. Then all of a sudden you feel the pressure to hire and go put a big number on the board.

1:14:28Joubin:So I'll wait. Okay. I killed the process with everybody. Wow. Tell everybody like, I'm not raising right now. Wow. I poked my head up and I realized I want to wait. And they were like, what are you talking about?

1:14:43Mark Roberge:Dude, you just like checked twice on a poker table. I mean, that's like, people are insane.

1:14:48Joubin:They were like, what are you talking about? And I was like, I'm just not, I just don't think the business needs it right now. And they were like, no, no, no, no, no. Like, that's not the point of this. And so, okay, that happened, right? Then, I'm just like telling you my lived experience. I might be wrong. This just happened.

1:15:13Then, Trump invaded Venezuela,

1:15:16Joubin:took up Maduro or whatever. And whatever, I'm not like gonna pass judgment on it. It was more like I had a moment where I was like, fuck. At any moment, anything can happen in the world that I have no control over. Right.

1:15:34Mark Roberge:These macro events are the scariest thing for investors and founders.

1:15:38Joubin:And I'm like, I got like, there was a moment where I was like, okay, am I getting cute with it right now when like a tier one, one a is trying to give me money. And I'm like, I'll just wait. So, so this is where the tension exists. Cause I'm like, it's probably best for the business, but what an asshole I would be if I blew this. And now in a month, some extraneous thing happens and I go out to hit the market and I can't raise money. Yeah. You wouldn't be the first. That would be insane. And so then I come back and, you know, there's an old, so then I start talking to one or two people inside KP about this.

1:16:18Joubin:And there's an old Kleiner law from, um, from Eugene Kleiner, like 45 years ago, that was like, uh, that says when the appetizers are being past, take an appetizer. It's a client of law. Nice. And so, you know, um, uh, FF stayed persistent and they were like, we want to do this. Like, we just want to do this. And they were the right partner for us. Um, and, um, I just, ultimately I decided don't get cute. You could wait a month or two, close some of these deals, get a better valuation. Don't get cute. Just capitalize the business, get the right people, move on. But my initial instinct was like, wait, don't need it.

1:17:13Joubin:And so, you know, like, okay, great. Like now,

1:17:20Joubin:you know, the clock starts, meaning

1:17:29Joubin:there's real expectations. By the way, it's not a little valuation. Of course not. There's real expectations. That's the market right now. And

1:17:43Joubin:they signed on before a, at the time, seed stage company closed multi-million dollar contract. Insane. And so now I'm like, all right, we're going to go out. And then what? Like, when does this, you know? Well, I think like, first off,

1:18:02Mark Roberge:I have a lot of conviction on your strategic decision here. And I think you made the right call, but you have to like balance it with the right operational system. And it really comes full circle in our talk today, where it's like, that's great. I totally agree on when the appetizers, they're taking appetizer. I've gone through that with plenty of our portfolio because you just don't know what's coming. The problem is once you do, don't let the valuation or the IRR of an asset class dictate your operational scale.

1:18:35Joubin:That's right. I agree with you. And by the way, not for nothing, but the reason I chose the people that I did around the table, Mamoon and Trey. Right. Like, okay, Trey Incubated anduril. They're raising at$60 billion. That's like public. Mamoon was the Series A investor of Clean, Rippling, Figma at 80 Post, Slack. So my point is like, this is not, I have a lot of work to do.

1:19:01Mark Roberge:You don't have a principal that's white knuckling their first deal.

1:19:06Joubin:It's just long term. It's just long term. They understand the messiness. and this is not the most important. This will not define their career. If it does, we're doing something well.

1:19:15Mark Roberge:Yeah, and I think to frame this, hopefully that I think a lot of founders don't understand is how much you scale, the revenue achievement you make in 2026, 2027, and 2028 should not have a lot to do with how much money you raised at what valuation. of course that sets the goalposts and there's some extremes to it of course if you took private equity and they were managing a rule of 40 that's a different story but i'm i'm just hopeful that i'm we're talking in this podcast about a way to for you to optimize the right pacing because you could have taken half the amount and half the valuation and just run this playbook and you still scale at the same pace and people would have given you money.

1:20:04So just like, just think about that. Totally.

1:20:10Mark Roberge:I, um, this was fun. It's almost like we catch up over coffee, dude, just in the public eye, which I love. It's always great to jam with you. It's so awesome to see where you've ended up in your career. I was hoping that that would be the case because I hate to see, you know, as, you know, I like to reflect on other people's gifts and I like to see them end up in their destiny role. So it's really awesome to see.

1:20:36Joubin:I appreciate you saying it. It's, um,

1:20:42Joubin:yeah, this is, this is it. Yeah. This is it. It's great. You know, uh, how long are you for

1:20:50Mark Roberge:Wednesday? Okay. It was tomorrow. I came in Saturday night, you know, kind of making all the, I guess like tying it back to the commercial strategic interest using the book content to spark these reunions and like talk to a bunch of pre-seed VC portfolios to like first off hopefully help them with the scale and hopefully like maybe we get a couple deals out of with stage 2 you know.

1:21:18Joubin:Cool. Well it's great to see you. I appreciate you doing this man yeah congratulations on the book if you um if you want to buy it go to amazon yeah amazon

1:21:28Mark Roberge:again it all goes to mental health we got a taste of it today what's the name of the book it's called science of scaling by mark roberge and um yeah so we brought that up a lot and then uh we just actually today by midnight we close our fourth fund at stage two capital congrats we're over a thousand cro's and cmos as lps now so we can cover almost any b2b breadth of who you're selling to and what kind of product you bring to market. And if you want a pre-seed, seed, or a partner on your cap table that's a go-to-market expert, just give us a ring.

1:22:02Joubin:Congrats, man. How big is the fund?

1:22:05Mark Roberge:100-ish. Yeah. Some have been a little bigger. I think this one might come in a little under, but we're around there. That's just the fund math.

1:22:12Joubin:Congrats.

1:22:13Mark Roberge:Thanks.

1:22:14Joubin:So stoked for you. Good to see you, man.

1:22:16Mark Roberge:Yeah, you too, Juvian.

1:22:18Joubin:That's it for now. If you liked the episode, please leave us a review or go back into the archives where we've done more than 200 episodes with some fantastic folks. This podcast is a Kleiner Perkins production, and I'm Juven. Thanks for listening.