20Sales: How Snowflake Built a Sales Machine | Why You Have to Hire a CRO Pre-Product | Why Most Sales Reps Do Not Perform | Why Hiring Panels are BS in Interviews | Why Remote Sales Reps Do Not Care About Their Development with Chad Peets

22:23You got to look at the business, right? Like, let's say you look at a business and say, okay, our land motion is really good. We're landing. I'm making these numbers up. We're landing. The average land sales cycle is four months. We're landing it 75k. Okay. That's a good land motion. I'm happy with that. Now, my expand motion is taking 12 months and I'm expanding from 75 and I'm getting an expansion of 50. That's not good. The sales cycle for the expand is too long, and the dollar assigned to the expand is not high enough. I can start to pull different lovers in the complex. So I can say, hey, Mr.

22:57Sales Rep, I'm going to pay you 10 % on the land. I'm going to pay you 12 % on the expand. And just by doing that, I'm going to get a lot more focus on the expand because I pulled that lover. How big an ACV do you think you have to have to have a proper sales motion to justify it? So my biggest worry today is you see a lot of SaaS companies have 10K ACVs and actually Jesus when you have SDOS, A's, customer success for 10K ACV that has a variability on expansion. It's not enough. Yeah, that's a problem. So first of all, you have to decide in my and inset sales organization or an outside sales organization or both.

23:35Hopefully both, right? You really want to get both because if you have both and you can get the velocity business and you can get the enterprise business and you want both. So if you look at a 10kA CV, well, that's definitely not a field sales rep. If I'm a 10kA CV that I'm exclusively inside sales and I better be able to keep the cost of sale low. Otherwise, to your point, I can't justify it. The unit economics don't work. And then you have to decide where do I draw the line between inside sales and outside sales? So let's just say you're happy with a 20kDL in the inside sales. What number are you happy with in the outside sales?

24:07And it's sort of a rough benchmark. You want to be able to get 3x. So there's productivity numbers, right? Like productivity is how we measure everything. It's sort of a rule of thumb My reps should be able to generate three times the ROTE. So if your TEE's 300 rough numbers You should be able to get 900K in productivity. How often do you get that? Well, you better get it or you're not scaling if you have a field sales organization and you have 10 reps and the productivity is 600 grand you better not be hiring you need to you need to get that productivity and until such time is either you get that productivity up or at least can look at the data and see that it's trending in that direction and you trust that data, you can hire ahead of getting the productivity number, but you better trust the data.

24:50How do you think about Ramptime? When we think about getting to that 3xOT, a lot of people say, well, it's enterprise sales. It's very long sales cycles. The Ramptime's tough. How do you think about that? I mean, look, what I want to see is six months for an enterprise seller. So there's ramp times for inside, ramp times for outside. that inside, I'd like to see 90 days, outside six months. Reality is it probably trends more towards nine months in enterprise. Then you have to start peeling back the layers of the onion. Why is it, are the sales cycles that long? Maybe the sales cycle is only four months, okay?

25:22Then why is the ramp time nine months, right? Is it an enablement problem? Is it a product problem, right? Or is it just the nature of the business and there's nothing we can do about it? But ideally you want it to be at six months. Do you think people hire or founders specifically higher sales enablement early enough. And I'm intrigued. What do you think of the biggest mistakes you see founders make with enablement? So first of all, it should be the CRO's decision, not the founders. The CRO, if it's 10 reps, you can handle it. Like the CRO can be doing it. The problem is, as you start to scale, it needs to become programmatic.

25:54And when it becomes programmatic, your CRO can't do it. He's got other things he needs to be doing. So a 10 reps, do you need a nail in person? Probably not. And each circumstance clearly is unique. but at 30 to 40, yeah, you better start to think about it. And so you want the messaging and the program to be rolled out uniformly. I don't want managers doing their own thing. So the managers have to execute on the enablement, but they have to execute on the enablement plan that the enablement person has created. They cannot go off willy -nilly and do their own enablement. And you will see that from time to time.

26:25You said about kind of incentivizing expansions. It made me think of a conversation I had with Chris before when we spoke about CS, customer success. Often customer success are attributed or given the role of expansions and making sure that customers expand as they would want to. So hot topic. I mean, this is an ongoing conversation it has been for years. Customer success is hard. I don't know that I can look at any one company and say they've nailed customer success. As Chris I'm sure told you, they don't believe in customer success. They don't have a customer success organization at Snowflake, or at least they didn't.

26:56Maybe they created one out, but they didn't. The feeling was everybody's in customer success. If you agree with that, their NDR looks, Snowflake has a world -class product. In the early days, it was crazy. Like, people would buy a 15K land deal and they'd expand to 150 and six months, right? So when you have product like that that just expands on its own, you can get away with less customer success. I've not seen that since Snowflake. I haven't. So do I believe in customer success? I do, right? Now, how do you roll that out? That's an open debate. But do I think you should, what I don't agree with is the rep does the land deal walks away and the customer success rep is responsible for expansion, expansion is sales, right?

27:37But the customer success rep high level needs to make sure okay number one is the product being implemented Okay, have they got the product in number two? Are they using the product and are they are they hitting their utilization rates? Are they exceeding those utilization rates? Are they getting the value is your champion getting the value out of the product that he or she thought they would be getting? Are they going to continue to be a champion for you internally and go talk to other departments so that they come back and buy your stuff? Customer success needs to be managing all that. The sales person is working, should be working like this with customer success.

28:10They should be hand in hand. You don't always see it that way, but that's the way it should be. When you see founders today and when you work with companies today, what are the biggest mistakes you see in terms of that relationship between sales and customer success? You kind of hit on one. One of them is just like, look, let the rep do the land and customer success is responsible at that point. That just also drives really shitty behavior from the rep because the rep is just not focused on the customer journey. The rep is focused on getting a deal done and walking away. You do not want that because then you can get over book deals.

28:41So I can go into an account and think, well, let's just say you're on a consumption model. I think that these guys probably need to consume $50 ,000 in credits over the next 12 months. But I'm paid off of bookings, right? Not consumption, I'm paid off of bookings. So maybe they're only gonna consume 50, but I think I can get them to commit to 100. Can't fault the sales guy, he wants to get paid. So he's gonna go book $100 ,000 deal, and then a year from now, you're in deep shit because you booked $100 ,000, they've consumed 50, and now the accounts at risk, you're gonna have churn problems, you're certainly not expanding.

29:13And so that behavior has gotta be worked out of the rep so that the rep understands, look, you've done the land deal. That's the beginning of the journey for you. The big payoff for you is on the expand deal and the further expansions. So first and foremost, you need to get the sales rep thinking about the entire customer journey, not just booking a deal and walking away, which is very different than how software sales has been historically. When you were selling license deals, you walked in, did the deal, and walked away. It's completely different now. Completely is different. We mentioned there about Chris Snowflake, then not agreeing with CS.

29:49I'm just interested because when I spoke to Chris beforehand, he said that you were essentially call to hiring really the entire sales team for the first five years at Snowflake. I just want to dive into that because you mentioned before about the velocity that you had. What are some of your biggest lessons on what worked first? So first of all, we talked about being willing to have conflict. There's going to be conflict because each manager is going to have his or her own ideas about the profile and about the process, right? Well, they don't get to have that. And if you're going to go hire a world -builder world -class sales machine at scale and quickly, it has to be a well -oiled machine.

30:29And what that means is we have a process, we don't deviate from that process. So I'll give you an example. Sales rep. Sales rep has called for interviews. So sometimes you'll get, okay, Mr. Hire Manager, you interview the rep. Binary. You either want to hire him or you don't. Well, I'm not sure. So, I'm gonna have him go talk to three of my peers. Nope. If you can't make a decision on whether or not you wanna hire a rep, let's just say you get two interviews. First one's for selling, second one's for qualifying. If you can't make a decision on whether or not to hire somebody after two hours with him, you're the problem.

31:04Not the candidate, it's you. It's binary. Then he goes to the next step of the process. Binary. Moving forward or not. Next step. Binary. Moving forward or not. And you do not deviate from that process first and foremost. So oftentimes I love a higher manager say, Hey, I really I like this guy. I want to bring in a sales engineer to get his opinion. Nope. Well, he's going to be working with the sales engineer. I don't care if you're going to be in my interview process You are either uniquely qualified to qualify or you are uniquely qualified to sell if you are not one of those two things You are not getting into the interview process And so you'll see companies everywhere.

31:39They're like, we want the person from HR. I got this engineer. What do those people know about hiring salespeople? A different people, not qualified differently, to qualify different skills. What's an engineer know about qualifying a salesperson? What you're gonna go to is culture. Well, we want to see if it's a culture fit. Nope, because here's the problem you have, okay? So you bring the engineer in, number one, it slows the process down, okay? Number two, there's risk. I don't know what this engineer is gonna say to the sales guy. we're recruiting. He could say something about the product that he shouldn't say.

32:08It scares the shit out of the rep. Okay? So there's risk there. Three, say the engineer, the rep candidate interviews with four managers. They all want to hire them. The engineer is like, I do not want to hire them. Now what are you going to do? You're fucking hiring them is what you're doing. But you've just pissed your engineer off. Well, I don't think you should hire them. We're going to hire them anyway. Well, I don't agree with them. Now you got friction in the organization. Or are you going to say, okay, well, us four sales leaders like them, but this one engineer knows better than us four sales leaders about hiring a salesperson.

32:37I don't think so. You mentioned speed that. You agree with high -false -file -false, and how important is speed? 100%. You have to hire fast. If you're going to go scale, you have to hire fast. But the key is understanding the profile, having somebody on the front end, which in my earlier days was me, and this is the profile. I'm not deviating from it. Back to the conflict thing, I said. So let's to say you hire a new VP of the East. And he has his background. And he's got five people he wants to bring with, which is a good thing because we need to hire. But he has these five people and they don't meet my profile.

33:13If I'm not on the front end, where somebody like me isn't on the front end, to support Chris and be Chris's eyes and ears, then this VP, because Chris is now running a 400 person organization, he's not interviewing every candidate. He doesn't have the cycles to. This VP is gonna go hire five reps that we know don't match our profile. Now, who knows more about which profile works? A VP that we've just hired, it's never sold the product, doesn't know anything about it, or Chris and I, who have built the entire sales organization. Well, I would argue Chris and I know the profile better than this person, but this person wants to bring in his five buddies that don't match the profile.

33:47I'm sorry, Mr. New VP, not happening. And I've had many of these conversations, but Chris empowered the thing. vary depending on geography, client type, ACV size. Sure, slightly, but I mean, there's just still the core things you're looking for, right? So think about what's the job I'm hiring you to do? It will sell software. Okay, it's more nuanced than that. So not to pick on Oracle, but I'm going to pick on Oracle. A reps it Oracle right now. He's selling software, right? He's selling software. That's what he's going to say. And I'm going to say, okay, are you doing pipeline generation? Yeah, I'm selling our new X product into all these historical accounts that have never brought X product.

34:24I'm hunting for new logos. No, you're not. You're going into install -based accounts, selling a product into them, probably just convincing them to do a rap and roll, saying, hey, if you buy this product, I'll discount the shit out of your existing license to buy this product from you. Now, take that versus, you're gonna go work for Snowflake, a 10 million, that's a 10 million dollar ACV company. Nobody gives a shit about a cloud data warehouse. Nobody's ever heard of Snowflake, and I'm gonna take that rep and give him 25 accounts and say go convince those accounts to move all of their data from on -prem to a company called Snowflake they've never heard of.

34:57Those are two very different jobs. Should AEs be responsible for DeMondjen? They should get some support. It's a gray area, okay? They should get some support. But if I ever hear that a rep says, why aren't you hitting your number? Why I'm not getting any leads? You ain't gonna make it. So yes, they are ultimately responsible for their own lead generation. But they should be somehow quickly. Do you know when you've made a missile? I mean, like I had somebody not long ago say, look, we hired a rap, it's been three weeks. And I'm like, okay, look, if you're going to make a decision after three weeks, there needs to be an HR issue, substance abuse issue.

35:31The person is not showing up for work. It's got to be super obvious to fire that quickly. If you're starting to see signs, well, hey, look, you committed to the person. It's your hire. It's your job to make them successful. So if you're seeing worrying signs, fix them. So I don't want to give you a timeline, right? But when you get to the point of, okay, it's time to change this person out. It's because you've done everything you know you can do to make the person successful and they're still not getting there. And you can look at the account list because there are times when you hire good reps into shitty accounts.

36:05So you also have to be honest and say, okay, is this just the patch or is this the individual? And a good manager knows this stuff, right? So it's the point in time where you say, I've done everything I can do to make this rep successful. There's no extraneous circumstances which would be causing him or her to fail. It's time to make them move. The other option is you have a rep that's been doing well and now they're not doing well. Sometimes, especially at startups, it's a grind being a rep at a startup. You may just lose the will to do it. And so at three years, what happens is you start to see behavioral changes.

36:37Reps not showing up in every call. I look at the pipeline. His pipeline is light. I'm measuring his number of new business meetings. Those are starting to drop off. So I'm looking at the data saying something is happening here. What's happening? And then you got to dig in. It's the biggest reason why previously well performing rap turns into a non -performing rap. There's a lot of factors, but some of it is just what they get tired. I had this debate with one of our CEOs not long ago. And he said, look, I want my reps. Sales reps should love their jobs. They should enjoy their day jobs. And I said, that's not possible.

37:12They can love working for us. and they should. They should love their CRO. I respect my CRO. My CRO is invested in me. He's developing me. I'm winning it. Right? Big thing. I'm winning. You're making me successful. So I may not love every aspect of my day job, but I love working for you for all of those reasons. But do I like getting on the phone and making co -calls three days a week and doing pipeline generation? No, I do not. So having a rep that loves his day job is very difficult in our environment because nobody likes doing pipeline generation. It's not fun, it's a grind. And so what can happen over time is reps wear out.

37:51And what you'll see after what can happen is, okay, I've been in the startup for three years, and I'm worn out. And then what do they do? They don't go to another startup. They go to a big company. I'm worn out. I don't want to do this shit anymore. It comes back to reading resumes. Hey, you were at this startup company, and you did really well, and then you went to IBM to use an extreme example. You went to IBM for five years. We're never talking. I'm never recruiting you. Not because you're not a good rep because by that move, I know what I need to know. You're done with, you don't want to do the heavy lifting anymore.

38:20Totally fine, but you don't fit into one of my companies. Are there any other core elements that you absolutely nailed with Snowflake that enabled the velocity, the scaling of that sales machine that we haven't touched on? You have to get every single person aligned on messaging, okay? Every person has their own different way of recruiting, But the messaging about the company has to be spot on and uniform. So like when I was at Snowflake, they asked me a couple times to come up there and record videos of my Snowflake pitch specifically around the equity, right? And so Chris and I would set up calls frequently with all of his managers because the data was changing, which meant the pitch kept changing.

38:58And so my job was to make sure that every leader, everybody in the interview process had the right messaging down. This is how we sell your shit and you need to be selling it the right way. If you get managers saying different things and selling it differently as the reps are going through the process, what happens? You lose credibility. Hey, this manager said this. This manager said this. What the fuck? Now I just don't believe anything you guys are saying. You see, you've got to get that you got to nail the messaging and it's got to be uniform. On the flip side, what did you not do well? When you look back now, you're like, we nailed the consistency of messaging.

39:31We nailed the process. What do you like? with the benefit of hindsight would do that differently. There were times when we were scaling faster where we could have probably raised the bar higher. In the early days. Is there any seed today better than waiting for the perfect candidate tomorrow? That's a balance. So look, there are many hiring managers out there, CROs, in fact, that will say I have a checklist of 10 things. I'm going to look for the candidate that checks all 10. They will go do 100 interviews and in nine months not fill the position. They'll get desperate and they'll bring in a guy because he has a pulse that checks two out of the 10.

40:04I've seen it a lot. And so to answer that question, it's a balancing act. It's a, but when you're hiring at scale, you have to hire. Because if you can't hire next year's forecast, not this year's, but next year's forecast is shot. Now you're going to the board saying, I got a lower the number. I know we raised off of doing 200 next year. I get it. I'm sorry, I can't hit 200 because I'm 50 heads behind because I can't hire lower the forecast, which usually means a CERO is getting shot. It's balanced to answer your question, but not hiring and missing recruiting is not an option. What have been your biggest mistakes in recruiting?

40:37I heard you were the best in the world that sales recruiting. That's something from Spicer. I work on this today. I am not afraid of conflict. I don't like it. My wife, I think, thinks I like it, but I don't like it. I'm willing to have it to get to the right outcome. Having said that, I need to work on my diplomacy. As Mike has said to me, look, you're all about saving time and being effective when you deliver message, which is correct. If I have something to say, I'm going to say it, and I probably could say it in other kinder, softer gentler ways than the way I say it, which would be more effective in the long term, than just saying what I have to say and getting it out there.

41:13And so my approach, and I do think I've gotten better at this, but I still need, I still need to work on it. My approach in terms of how I communicate and being more diplomatic, I would have done a better job at that in the past, and hopefully we'll do a better job going forward. Everyone wants to work at a hot company. Snowflakes is a sexy company in many respects and when it was growing super fast as a startup, it was, how do you detect the company, the people who just want to see it on the rocket ship? Because it's a rocket ship. No, I mean, I'm sure we hired a lot of people like that itself, like, but again, it comes back to when you intervene, what are you looking for?

41:45Are you looking to be developed, right? What is your motivation for wanting to come here? Well, it's the hottest thing out there. Okay, I get it, but is that it? Is that all you're looking for? Right, are you looking for career progression? Are you looking for development? You just want to be a part of something hot. So no, I don't think it's bad. Look at it. Look at Databricks. Right? Like Databricks is hiring lots of people So I might argue too many people. We'll see how that plays out a lot of people are just going to Databricks It's a hot company or so they think what makes it great sales rep today and it's not changed over time I don't think so I don't think it's changed.

42:17I mean, it's been it's what's what has happened is become harder to find Why is it become harder to find because our world has changed? You know, sometimes I feel like I don't have a place in this just to be honest. I'm not sure I fit into the world going forward But like like we talked about earlier, right? Like you know if I try not to say controversial things here You can take the matter if that you have to care and be willing to sacrifice to do exceptional things to be exceptional And what I find today is people are not willing to do that They they hey, what what's the culture like? What does that mean to you culture to me is I want to go to a place Where we're gonna win I want to go to a place with a world -class sales organization to say I'm a part of something special.

42:55I want to go to a place that develops and making me better. I want to go to a place that believes in meritocracy. That's a great culture to me. You ask other people to define great culture. Well, tell me about how you guys view paternity. How much time do I get off of my wife as kids? Tell me about your benefits. Do you guys, do I have to be in the office? You know, I like to be home at four o 'clock in the in the afternoon so I can be with my wife and kids. That's fine. Okay. That's the world we live in today. That's not me. And it will never be me. And I will not hire people. Can you be a truly great sales leader on how balanced?

43:26Yeah, for sure. All of us have balance. Every CRO I know that's world class has as wife and kids. But how do you define balance? You don't have balance. I don't have balance. No, fair. But I haven't. I'm a great father. My wife was to everybody. I'm a great father. My kids love me. I'm there for my kids when they need to be there for my kids. But I, people sometimes define being a great father. Husband is the quantity of time with your family. I define it as the quality of time with my family. When I'm with my family, I'm with my family. Other people say, well, I need to spend X amount of hours with my family, but they're not really present, they're doing other shit.

43:59I prioritize quality over quantity. Is what you're saying, there are much fewer sales people and talent that are willing to give the intensity, the competitiveness, the unwavering commitment that is required to be excellent? Absolutely. I'm a founder that you're advising. How do I combat that, then, Chad? I hope somebody can solve it and tell me, Because I don't know what it is. Recruiting today is harder than it has ever been for the type of rep we are looking for. For somebody that's willing to put the work in, it's looking for the development that we offer. Lot of reps today just don't give a shit.

44:29They just don't care, which is a concept I simply do not understand. If I'm going to do something, I'm going to go all in and I want to be the best in the world at it. A lot of these people just don't care. So that's a problem. What are you doing to solve it? Nothing. I will not budge on the profile. Right? Like we will not bud. Like even somewhere in Sierra, well, there are certain aspects of the profile that I will not budge on. And so what happens is, it's pointing you, budget. You've got to be willing to put the work in. Would you put your budget on remote? Depends on the function. Inside sales.

44:56Absolutely not. Somebody said to me the other day, they were building an inside sales team. And he said, look, we require inside sales people to be in the office. My competitors don't. So they're beating me when it comes to recruiting. Because I'm calling reps saying you have to be in the office five days a week. They're recruiting reps saying, no, no, no, you can work from home. So I'm losing. I said, the fuck you are, you're winning and you don't even know it. He said, well, what do you mean? I said, well, let me explain to you, I'm going after salespeople to care about their career. Okay? I want the best of the best that are willing to invest in themselves.

45:24Any inside salesperson should recognize that by being in the office, they are going to get better faster. They're going to develop faster. They're going to be better at what they are doing faster. If a sales inside salesperson is not willing to make the sacrifice of a 30 -minute commute every day to further his own career. I don't want that person. So you go ahead and hire, you build your company with those people. I'm going to build my company with the people that are willing to make the sacrifices to do something great. And I tell you what, I'm going to kick your ass. That's a lovely chart. No, one I totally agree with you, but I also think there's like real information advantages that come from physical co -location, which is like, oh, you hear product talk about how the new feature of that building, you hear customer support talk about problems, you hear those customer conversations.

46:10It all feeds into a much more to your point earlier, cross -functional organization, which works together better. 100%. So there's certain functions like a feet like an outside salesperson, you can't make them be in the office, I don't want them in the office, I want them in front of customers. It's outbound dad. I mean, look, I don't think it's dead, but people are having to find new ways to do it. Like, what I'm being told, and again, I don't do it, but the feedback I get is emails linked in, simply doesn't work. It just, there's too much of it. So what I'm hearing is it's gotten back to old school, which was getting cell phone numbers and making phone calls, which I don't think is terribly effective either.

46:45But it's, as I be, it's being shared from an SDR standpoint that is more effective than just messages. So I think content is the most important thing in the world today when it comes to the world's process because I think if you cool me and say, Hey, I'm from Snowflake and I go, Oh, I actually loved your guide that you released last month. What can I help with? Suddenly that's a much better style. It is, but like, what if you're a startup? Well, I work for XYZ company. I'm trying to sell this product. You never heard from me. Snowflake was your hook there because everybody's heard of Snowflake.

47:13So, okay. But what if you're a company nobody's ever heard of? You've got to do really effective content marketing. You do. I mean, I'm not saying it doesn't work. And by the way, this is where I think AI comes in and helps a lot. It's a way of doing that. It's a way of verticalization helps a lot. If you are selling two restaurants a month, I can weigh more because it's customized content. And that's why it's so interesting. You said early, like the horizontal approach. I love the verticalized approach. I look at notion and I look at air table. and I look at all these companies, actually question for you, all of them are trying to scale into enterprise with a PLG motion.

47:46I think that's really fucking hard. Getting the world's biggest enterprises to adopt notion. Are you kidding me? It's a totally different motion. It's a totally different motion. And the problem, I mean, look, there's a lot of time you can spend on this, but PLG, you've got, I don't know enough about their businesses, but let's just say you've got a low level developer that's bought your product and is using your product because it's PLG, right? So he's put his credit card in, he's using your product. And now I want to go sell to the CTO. And I have an enterprise rep, totally different motion.

48:15So it's a completely separate sales organization. So now I've got an enterprise seller in there. I want to go sell to the CTO. CTO probably does not give a shit that he's got a bunch of engineers using the product. It's a completely different value proposition. And so a lot of people think, if I nail PLG, then I'll nail enterprise. You can nail PLG and enterprise. I just would argue that nailing one does not necessarily make you more likely to nail the other. So if you can do both, do both, but you got to, in my opinion, you got to start with direct sales and then let the product get to where the product needs to get through and then go to PLG.

48:49You think it's easier to start with enterprise? I do. Now I'm not an expert on this, but I do. PLG is largely just, enterprise is driven by a go -to -market function. It's an entire function. PLG, yes, has that, but it's largely different from the product. One of the biggest mistakes I find founders make that I invest in is they say too early we're going to expand into enterprise. They say, oh, we're getting pulled in, we're getting pulled in and I'm like, you're three million in ARR. You don't need to be pulled anywhere. How do you think about timing of the expansion? So when we build companies, let's go back to self -like.

49:20We start in mid -market because why? Because I want to take a very small, I say, set of accounts, typically smaller accounts because their demands are less. And I want to nail it, I want to build the product to make them happy, right? So like we have another one of my company, Sigma, people say, well, it's a mid -market company. It's not a mid -market company. It's an enterprise. We started in mid -market by design because you want to have some set of customers that you can make very happy. And it's always going to be smaller accounts first. As you're making those customers happy, you're learning, as we talked about earlier, about what it takes to make the enterprise happy.

49:53And you're building that product out. So eventually, yes, you will move upstream to the enterprise. But oftentimes, you're 0 .10 million. I don't, you can't pick a metric and say, that's the metric. It's a feel for what you're getting from the customers to understand when the product is ready. But yeah, you see customers, excuse me, companies go to the enterprise way too fast, right? And any company whizzes the only one I've seen do it successfully where they started in the enterprise. But typically you want to start mid market, which buys you time to build the product and feature set to go to the enterprise at some later day.

50:23Do you agree with the common statement that your smallest customers will most often be your most painful. The wrong customers can be your most painful, right? It's not the size of the customer. It's the wrong customer. If you're trying to keep a customer happy that ultimately isn't a good fit, and I don't like churn any more than anybody, but sometimes you have to look at certain customers and say, it's better that we churn this, churn the account. We can't keep them happy. We're committing too many resources to keep this small one happy. Gross revenue retention or net revenue retention. I always have this conversation with Dave.

50:54Two different metrics that measure two different things. Which one do you think founders should focus on more? Everyone talks about an R. Look, I don't think one is more important than the other that you just have to look, they measure different things. Gross retention tells me if people like my product, right? Like, I understand if my gross retention is 90%, I probably have a pretty good product, right? If my gross retention slips down to 70%, I have a product problem. Net dollar retention is about expanding. So you can have high gross retention and a low NDR that doesn't necessarily mean you have a product problem.

51:25That means you might have a go to market problem. You might have a customer success problem. There could be product attributes that contribute to it. And the GRR measures to me is really about product. NDR is yes, it's product related, but it also ties in a bunch of other things. So I wouldn't say one is more important than the other. But I will say this, if you have a low gross retention number, by the way, by definition, you're going to have a low net dollar retention number. But if you have a low gross retention problem, you got problems. You can have a high gross retention and a low NDR and yes, you need to address it But it doesn't mean you're in deep shit But if your GRR starts to slip you got problem.

52:01Good GRR starts to slip and the company starts to not do as well It's tough to have that morale that's still in good shape How do you advise sales leaders on how to keep a sales team together when you're in a really shit patch and there's not momentum And it's just shit It's tough and the people that are going to see it first are the sales engineers. Sales engineers are going to, and so what will happen is your SEs will start to depart before your reps. And when your SEs start to depart, reps know that the SEs know more than the reps know about the product, right? So your SEs start to depart and the reps will start to follow.

52:36And so again, it comes back to we talk about operating in silos. So if I'm a sales rep and I'm like, hey, we're losing accounts because our, we said we work on, why do you lose accounts, right? So why do you have, why do you have churn? lots of different reasons, but you can have churn because we said we were going to deliver something and we didn't deliver it. They bought the product, we committed, we didn't live up to that commitment. One, two, product just isn't working. That's another problem. Three, they're not getting the value out of the product they thought they would. And so as a sales rep, you're taking this information, you're feeding it back to the product organization.

53:05If the product organization is going like this, your reps ain't going to stay. If the product organization is saying, we got it, we hear you. Here's our plan to solve for that. We will deliver on this plan over this time frame and then they actually deliver on it Then you can hold the sales organization together But if they don't you got a problem because the salesperson feels like I can't win I go into these accounts. I can't win. I'm doing everything I'm supposed to do You've sent me into a gunfight with a switch plate. I'm doing my job help me arm me and you're not arming me You're telling me that I should win with my switch plate or more more to the point you're telling me I have a gun and it looks like a switch plate.

53:42I'm like, no, I have a switch plate. I think the challenge I often see is I think CEO sat four costs or sat revenue goals, which are well above the expectations or beliefs of the CRO and it sets everyone off failure. I mean, here's the most common thing, right? CEO says, okay, I got to go raise around. I want to raise around disvaluation to get to disvaluation. Forecast needs to look like this next year. Guess what, Mr. CRO? Here's your forecast for next year. The right CRO. Now, our companies are different. This cannot happen in our company. We will not allow for this, right? So Sutter Hill company CEO says here's a forecast for next year We say great Chad Pete's John McMahon your CRO or agree our agreement with this right because if they're not That's not the forecast so there is alignment.

54:24We do not do this. This is a mistake We will not allow for it Sutter Hill outside of Sutter Hill CEO says I got to go do this and there are companies You and I both know where this has happened the CEO the CRO either has to say hold on I am not committing to that. Like he says, or productivity number, right? Like the CEO will say, productivity this year is at 750. Next year it's going to 9 .50. Oh, is it? How is our productivity pro rep going to magically go up by 200 grand? Oh, it just is. You can't have them, right? But those are the different things they do to justify the higher forecast to get the round of funding.

54:57It's tail wagging dog. The business should dictate the forecast. Not some arbitrary number that we need to raise around the funding, but that is what happens. And so back to the point, CEO says to CRO, here's your forecast for next year. CRO's got a decision. You either stand up for it right there or you accept the fact you're getting fired in nine months because you know you're not hitting that number and I promise you they're going to blame you and this happens a lot. How many do you think stand up at the time and say, no, I can't hit that number? Not enough because they want to keep their job and it's like, look, I'll do everything I can this that and the other, but like they know.

55:30Oh, same thing with hiring, like I got 100 reps. They just told me I got to go to 200 reps. I can look at the data and say, we're not ready to go to 200 reps. CEO says in order to get to the forecast, we got to go to 200 reps. What is the biggest way that people fuck up onboarding? You know, I had that out of STRs from Repling on the show. She's had 350 STRs in like a year or two months, or two years. It's a lot. Yeah, I mean, I know I'm credit to, I'm saying that with compliments, but it's like, I'm thinking about the onboarding. It's gotta be programmatic and you got it, you got to dedicate resources to it.

56:01I mean, too too often, as we talked about early stage, fine, once you're at scale like that, you have to have a programmatic approach, right? And you have to invest in it. There need to be classes. You need to bring them on site. It needs to be an ongoing process that takes months that you are and don't get greedy and try to put the rep into a position where you're expecting revenue before you should expect he or she to be enabled. Commit the time and resources and understand it's going to take this amount of time, This amount of resources to get our reps enabled do not take shortcuts people take shortcuts in discounting Is that okay?

56:34How do you feel about discounting? You know it again it varies on the stage of the company right early stage company look We do you'll do negative margin deals right like we're gonna do this deal But we're gonna lose money on the deal But we need the reference will account and we'll make up for it later Do you know in that state what he's done to reference will accounts actually make a difference early? they make a big difference. Because again, you have an ICP where all of the accounts have very similar criteria. So if to your point, if you're verticalized, which we all kind of are in the early stages, right?

57:05Because we have such a narrow ICP and you get some well -known account. All these accounts talk to each other and they respect each other and you get a reference of an account. That's meaningful at that stage, right? Later on, it's less meaningful unless it's a really big account and then it's more meaningful. Chad, I could talk to you all day. I kind of knew that from the first moment when you said about Wall Street. But I want to start, I'm sorry, I want to finish on a quick fire round. So I say a short statement, you give me your immediate thoughts. Does that sound okay? So what if you change your mind on most in the last 12 months?

57:37That the world is changing, and I need to accept the fact that it's changing, and people may not come along with the way that I see, with what I see. Can you not just keep going the way you are, just with the same network? I'm going to try. And if I get to a point where it's like, Like the world doesn't want to operate the way I want to operate, I will likely retire. You don't want to change. I'm not going to change. No, I mean, I will change certain things. I need to be more diplomatic. Look, the thing that keeps me coming to work every day is learning. That's what turns me on. I want to get better every day.

58:05I want to work with people I can learn from every day. So that in and of, that's kind of changing, but there are certain things I will not change. What's your biggest advice to someone starting a sales rep role tomorrow? Take the time to invest in your career. Reach out to people to learn, learn as fast as you can and work as hard as you can, and you will become better than everybody else around you. On the flip side in terms of hierarchy, you've got a sales leader, and I call you up the night before I'm starting my first role as a sales leader. What would you advise me knowing all that you do now?

58:36Understand our business. So when you get here, you need to understand before it, because now you have people reporting to you that are looking to you to add value. Very difficult for you to add value and tell you understand our business. So get in front of customers, talk to salespeople, do whatever you have to do to learn our business as fast as you possibly can so that you can start adding value to the reps on your team as quickly as possible. What's the biggest piece of BS advice that you often hear about sales? I get tired of hearing people say, look, salespeople are coin operated and they are to a certain extent they're predictable, which I like.

59:07But I get tired of hearing, all salespeople give a shit about it, it's making money, They're mercenaries this that and the other I think that's bullshit. I think that's bullshit I think the right sales people do care about the company they care about the careers. Yes, they want to make money Right, but I think the right salesperson is more than about just making what makes my spice is so special what he's done is unparalleled I mean fuck I could spend three hours on that look I love Mike because Mike is always going to make the right decision Always yes, he's a good human being saying, yes, he's loyal and all that stuff.

59:39Mike is never going to take the easy path. Ever. He's always going to make the right decision, which may involve pain and doing difficult things. It doesn't matter. He's always going to do it. He's also the only person I've ever seen or heard about that is a good stock picker. He understands markets. He can see things around corners that most good stock pickers can, but he's also an operator. I've never seen anybody else that has both of those attributes. Tell me, what's the biggest mistake you see founders making scaling to 10 million in an error? in that first journey. What is this biggest mistake that you see found as that you were with me?

1:00:11They hired a wrongsirro. Pure and simple. You hired a wrongsirro because you have no idea what you're looking for. There's companies which you would know that I've consulted and I've spoken to their CEOs. And I'm like, what are you looking for in sales and they have no idea? And in order to make the right hire, you first have to know what you're looking for. And most of them don't even know what they're looking for. And the problem is they don't have people that they can reach out to to tell them what to look for. I don't fault them for not knowing. The challenges they don't have investors and board members that can tell them, Hey, this is what you need to go higher to and hiring the wrong CRO kill you because then he or she's gonna go build out the sales organization That's gonna be the wrong sales organization and it's gonna take you two years to figure it out and then you are starting over Final one for you Chad.

1:00:48What question are you not normally asked that you think you should be asked more? What's your biggest weakness? I? I don't know that I've ever got you've never gotten that I get like because my story's pretty unique right? Like there's very few people, in fact, I think I'm the only person that's ever gone from being a recruiter into being a managing director at a venture firm and then starting his own venture rates. Not that it makes me better than anybody, it's just a unique path, right? Like when I went to Sutter Hill and I was sitting at our partner meetings, there was one guy that didn't go to Harvard.

1:01:15That's me. There was one guy without an MBA. That's me. I'm the dipshit that went to USC. So I get questions about the path, but I don't get that question enough, right? Like what's your greatest weakness? What is your greatest weakness? It's being patient. Mike has helped me a lot, right? When I see what I deem to be an emergency, and there's people that have called me to the floor and there's rightfully so, when I see something to be as an emergency, I'm fucking all over. It's not, hey, let's take our time. Nope, this shit needs to be fixed right here, right now. And the reality is, when you have a hundred different fires, you have to learn to prioritize things.

1:01:54And every problem doesn't need to be dealt with today. Some of them can be put off for a period of time and I have had to learn that lesson and honestly I that Mike has helped me learn that and so because when you're constantly saying fire fire fire fire fire and they are fires People are like oh my god. This motherfucker's calling me again dude We just put a fire out. Can we hold on? So that's that's probably my biggest weakness is just learning some patience Chad listen, I absolutely love this. I knew when Degnan and Spice is several they did it would be a special one But thank you so much for doing this and I've so enjoyed it.

1:02:28Me too. Thank you so much. It's great to meet you. I mean, I think that's probably the best 20 sales that we've ever done. The thing I love so much about Chad honestly is you get so much BS or presentation from most guests on the show. That was raw, it was honest. I thought Chad was fantastic. If you want to see more on watch the full episode you can on YouTube of course by searching for 20VC. That's 20VC. But before we leave you today, we need to talk about our sponsor for the day. Clary, Clary is an industry leading AI -powered revenue platform that is purpose -built to help companies optimise their end -to -end revenue process.

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1:03:41As always, I so appreciate all your support and stay tuned for an incredible episode coming on Monday with Imran Khan, the OG of public markets. The man took Ali Bar Bar Public, he also took Snap Public. There is no better person for a public company breakdown.