Avoiding Early Stage Mistakes: SaaS Growth Strategies Unleashed with Alex Shartsis

Randy Wootton (00:04):

Well, hello everybody. This is Randy Wootton, CEO of Maxio, and your host of SaaS Expert Voices, where we bring the experts to you to talk about what’s going on in SaaS today and what’s unfolding as we get ready for tomorrow. Today I’m delighted to have a friend of mine, Alex Shartsis, who I’ve known for a couple of years. He is actually Oakland based, but he has deep experience in go-to-market strategy and execution for early stage companies, primarily focused on that seed through Series A and working with technical founders. Alex, you want to talk a little bit about your background? Well first, welcome, thanks for coming, and then just talk a little bit about your background and how you’ve come to this part of your career, where now you’re engaging as a fractional CRO or revenue strategist for the companies that you work with.

Alex Shartsis (00:49):

Thanks for having me, Randy, it’s exciting to be here. A lot of my clients and former companies use Maxio, so it’s also just fun to get to interact with the brand that you’re familiar with. So I got here the long way. I wouldn’t recommend this particular journey to other people, but I like to describe myself as a recovering founder. So I started as an exec after business school in a bunch of startups, some went public, some got acquired and then started my own company, which was a journey that I think is out of scope for this podcast, but we were a SaaS AI tool for pricing. After that went down and during the pandemic, I was asked to come in and help companies by their investors, either early stage seed investors or professional VCs, on their go-to-market or on corp dev type things, as well as running corp dev for a company called Opendoor, which is a public company.

(01:40):

And so it gave me a really unique insight. That experience gave me unique insight into what the end of it looks like. If you’re trying to build your company to something, a lot of the times, most of the time that’s an acquisition. So it was great insight to see how that actually works from the inside and what those companies look for. And it also is the other part of my practice, of working with companies that go-to-market is what I really enjoy. I really enjoy that early stage and one of the things I do is try and help people avoid making the same mistakes we made when we started our company. And I think there are definite, especially in SaaS, there are definite patterns in terms of what founders do early and late, that lead to better or worse outcomes. And so that’s something that I help people with.

Randy Wootton (02:24):

That’s great. And so currently, or in recent times, you’ve worked with about a dozen companies, again in that seed Series A. The things we talked about in the pre-brief are, you really help focus them on how do you scale your go-to-market, because it’s often an early stage technical founder who’s probably not experienced in go-to-market. So how do they think about go-to-market, the strategy, how do they scale it through that Series B, Series C, when they’re taking that money? How do you onboard customers efficiently? And then how do you make your first hires? And so what are the problem sets that you see now that you’re doing this pattern match, both when you were running your own company and now that you’ve been advising these companies, the VCs that you work with? What are broadly the three or four set of problems that you see that people are continually wrestling with?

Alex Shartsis (03:14):

So I think the problems evolve throughout the journey, and I think one of the things that we talk about a lot is it really is a journey. If you’re just trying to get rich quick, maybe startups and SaaS isn’t the right thing for you. There’s no overnight success here. So I think one of the biggest challenges that happens across the whole spectrum is hiring the wrong people. So I think that early on, you maybe don’t want to hire us, for example, a sales leader, you want to engage with those customers yourself and really understand what their problems are. And then eventually you get to a point where you need to hire that person.

(03:48):

You want to actually hire the right person, you don’t just hire your college buddy who wants to get into SaaS sales because they think it sounds cool. You want to hire the person who’s actually done SaaS sales at a company at that size and can pattern match and help you figure out those problems. I think what a lot of founders fall into is hiring the wrong people and then giving them too long to figure it out, for good reasons sometimes. Oh, it’s our fault, maybe we don’t have product market fit, maybe we don’t have the right collateral. Maybe our deck isn’t good, maybe our message isn’t good. All that’s true, but if a salesperson’s been there for eight months and hasn’t sold anything yet, maybe it’s them and that’s the easier thing to change. And so [inaudible 00:04:30]-

Randy Wootton (04:29):

I often talk about when you’re doing go-to-market, is it the market or is it the marketer? And I think for you, similarly when you’re thinking about sales, is it the product? Is it the positioning, is it the packages, the offering, or is it the salesperson? So let’s double click on that before we move on, in terms of when should you hire that first salesperson.

(04:49):

So I totally hear you, that if you’re an early stage founder, there’s a problem you’re out solving. The first wins are that evangelical sale, where you are representing the product, you know it inside and out, and also I think just the speed by which you need to take the feedback as you’re evolving that product market fit and then turn it into product. It’s just great if you’re the technical founder, to be able to hear it and do it. And so what are the signals or the green shoots that you’re looking for, for a technical founder to then say, “Okay. Now I am ready to go look for a salesperson and we’ll talk about how to screen to get the right candidate.” But what are those initial criteria that you’re hoping are in place before they even do that?

Alex Shartsis (05:33):

I think at first you need to sell some stuff. And I think that there is the occasional outlier, founder who is just so bad at sales that they should really consider bringing on a co-founder who’s good at sales and marketing and things like that. So that’s a real thing. I mean, it’s something that YC has always looked for, your hacker, hustler kind of model. And so I think being realistic about, do I really hate talking to people and doing sales? Maybe you need a co-founder that’s a salesperson.

(06:02):

But in terms of bringing on an actual, says account executive on their business card type of salesperson, you need to have a process that you’ve done a few times that works. It depends on the ticket size and there are a lot of specifics that matter, but a good rule of thumb is 10 times, because you probably don’t have 10 friends that are going to buy what you’re selling. And so at some point you had to sell to a stranger, but you want to have a couple experiences with strangers and maybe a few with friends, where you can say, “Look, I did X, I did Y, and then they bought it.” And not like, “I did this, and then I don’t know what happened and then they bought it.” That’s where you run into trouble, because it’s hard to hold people accountable and hard to coach them and make them successful.

(06:46):

I think it gets trickier as you grow, because you’ll eventually outgrow that initial salesperson. A lot of people try and hire the Swiss Army knife of like, “Oh, this guy, he’s going to be my CRO one day.” And it’s like he might, happens, but you really want to be realistic about what people are good at and what people are not good at. And I’ve found that some of the best early stage stage salespeople, I put myself in this bucket, are really good at just getting stuff done. But once you have a more mature sales organization, you need people to stay in their lane and just do their one thing. And those early stage people that are happy to go do everything are actually not very happy staying in a lane and maybe aren’t the best person to have on a Series C, Series D, later stage sales team.

Randy Wootton (07:33):

I think you’re right. I think there is this breaks that a lot of people talk about, the 0 to 10 million and then 10 to 50, 50 to a 100, maybe greater than a 100 million. Each one of those is in a different inflection point in terms of org size, it’s a different inflection point in terms of assumption around process, and data and tech that you can have access to. That below 1 million, which is often where you are in seed Series A is just a lot of, to your point, hustle.

(08:01):

So when I think about early stage founders and I’ve never been one, so I don’t have that experience, but you’ve been working with a bunch of them. Help me understand how do they get access to talent? Because one of the things that I take for granted is I come in at a Series B, Series C, it’s usually invested, it’s all the companies I go to are either VC or PE backed. They have a broad network of people that they know and they’ve got their 0 to 10 specialists in their stable that they will say, “Hey, go talk to Sally or go talk to John.” And often they have HR specialists on staff at those VCs, who knows the portfolio and has their own network. But if you’re an early stage founder looking for seed or Series A and you’re trying to get that salesperson, other than your college friend that you’re describing. What’s the best way to find the talent?

Alex Shartsis (08:46):

That’s a great question. So I think that it depends on whether you have resources or not. And so I typically work with companies that have raised some institutional money, maybe seed, maybe A, and at that point you can pay for either in-house or external recruiting, and we can talk about exactly what models I like there. You may have investors like you talked about that have a talent partner, that have a pool of people that can send out a hiring blast or whatever and help you find people within your broader network as a company, through your investors and your advisors.

(09:17):

I think the first thing is always, I like to tell people to go meet a couple of people that are really great at the thing that you’re hiring for. Because that early stage founder, who maybe was an engineer somewhere and has never actually run a sales team, you and I know what a great sales leader looks like at all these stages, but they may never have met one. You literally may not have had interactions with the sales team, even if you were at a Twitter or Facebook or whatever, and so I think it’s important to go meet a couple of people in your network that are really good at the trade. So you can figure out, oh, this is what I’m looking for, maybe that person wants to work with you, maybe they don’t.

(09:52):

I think that the thing that people forget is that there are people out there looking for jobs at startups, that are excited about that journey and want to go on that journey from the beginning. And if you find the right person with the right mix of skills and who is looking for that, whatever problem you’re solving will appeal to them. And you’ll be able to recruit them against a Google, or a Facebook, or a Series B, or Series C company, because they want the added responsibility and they want to have a bigger impact than they would at a later stage company. They don’t want to be put in a box and those people are out there, and so how you find them, I think there are different tactics, but you can find them.

Randy Wootton (10:35):

I think to your point, it’s creating a network and they’re very different personas. The classic technology leader and the classic early stage startup folks, they’re probably not mixing at a cocktail party or in the computer science lab on the university. And so it is a wholly different, in my experience, interaction and dynamic between how those people operate, how they’re motivated and how to interact with them.

Alex Shartsis (11:02):

Well, and the biggest mistake founders make I think in the sales department or marketing too, is hiring people from really big companies because they have a big brand and if you sold for Salesforce or for Google or for Facebook or what have you, like you said, when you’re in the 100 million to 500 million, that’s your guy. You want the ex-SVP at Salesforce to take you from a 100 to 500 million, but that guy’s not going to take you from 0 to 1, there isn’t enough fuel for their Porsche at that stage to get them to meetings.

(11:32):

It’s a different mindset and so I think that that’s one of the things that’s really risky early on, people have different opinions about this. My personal feeling is you want that early to mid-career hungry hustler, who cares about closing business and not about managing a big team, but could maybe manage a team later. Versus that established late career manager, who is going to come in and want to tweak your CRM and figure out your revenue recognition and do all these things that are important, but not until you actually have meaningful revenue.

Randy Wootton (12:04):

Yeah, I think you’re right. And that’s people, to your point, that have been great BDRs and then first or second tours in AE and have delivered on the quota, but want to become the sales manager, or they’ve had one run at sales management and so they understand process and reporting, is maybe an ideal candidate. One of the things I find with salespeople in particular is the best ones are great at selling and what they sell best is themselves. And so what’s your advice for a tech person who maybe just falls in love with the salesperson, because the salespersons going to tell them everything they want and they do the classic sales judo mind tricks on people. How can you poke through that and identify that they have the experience you want and that it’s sort of, what are your recommendations for the interview tricks and tips?

Alex Shartsis (12:52):

Great question. I think that engineers are used to interviewing other engineers who don’t necessarily interview terribly well and you’re right, salespeople are really good at selling themselves. I mean, I think whatever you do in the interview, you have to talk to references, former managers, former coworkers. I remember in my company that did pricing, one of our competitors blew up and I got calls from a bunch of their people to come interview.

(13:15):

And I interviewed the guy who they said was their top salesperson and he seemed all right. I got weird vibes, he seemed a little bit sketchy, but like he said, “He was really great.” And then I talked to their head of CS and she basically said, “That guy lies and over promises to every customer.” So he totally hit his quota, but every time it was a CS nightmare, where they were over promised on everything, on cost, on timing, on everything. And every customer that he brought in took a year for the CS team to either stabilize or they turn out. I mean, I think it really can run very deep. So to me, references are super important, of as much of the 360 degrees as you can, which includes customers. If they say, “Oh, I closed a deal with so-and-so.” Go find so-and-so and find out what they were like to work with. Did you feel ripped off? Did you feel taken care of?

(14:12):

But I think that the other thing with salespeople is that very little of what you do in the interview and hiring process, maybe you’re right 50 or 60% of the time, you have to be quick to pull the trigger when they don’t work out. And I think a lot of founders, because they’re nice guys, they’ve sold themselves, you’ve hired them, now you’re part of the problem. I don’t think Betty is doing a great job, but she really knows the product and maybe we need to give her a marketing material. You can come up with a lot of reasons at some point, and I would say that point is no more than six months. If they haven’t sold something or they aren’t on their way to selling something, if it’s a longer sales cycle, you just need to cut bait, it didn’t work.

(14:52):

I think that the combination, because you can overthink the interview process, so you want to check references. The questions I like asking are around sell me something, whether it’s your old product or an Apple iPhone. Sell me something, and are they asking questions or are they just in broadcast mode? There are things you can look for there, have them interview an advisor, that’s something I do for clients. I mean, I’m sure you do it for companies you invest in, oh, hey, I have a guy on my board or who’s a friend of the company, and they can maybe suss out some of it. But I think fundamentally it’s hire slow, be careful about that and if you have any weird feelings, don’t hire them. And then short leash, six months is long enough to prove some value and if you’re not showing value, it’s time to go find somebody else.

Randy Wootton (15:40):

I mean, the old adage that you’re alluding to is the hire slowly, fire quickly. I think the implied point you made was if you’re a technical founder, is one of the best things you can do is get a go-to-market mentor. And that could be someone, they don’t have to be on your board, you don’t have to give them equity. There are people out there that will do coaching, but I think building relationship with people who are further along in their career, so someone like you who then can help just provide a perspective on how this person stacks. Absolutely, spot on. It also helps you as a technical founder to learn the types of questions you ask. Along the same lines you mentioned Y Combinator, I think there’s some great organizations out there, like EO, Entrepreneurs’ Organization or YPO, Young Presidents’ Organization, where early stage founders, younger founders can join a peer group. And these are the type of questions you can talk to and get some insights.

(16:31):

The one you didn’t mention, which I always like, is well, the specific question about quota attainment and what did it take when they didn’t hit quota? What was the greatest win? Why was it the greatest win? When did they lose? Why did they lose? The other one is around doing the homework. So not only should they sell you an Apple phone, but if you’re far enough down the process, you should say, “Okay, great. Come back and pitch my product to me.” Go to the website, go do some homework and research. And if the salespeople that are really serious about the deal, that is what you do when you do outbounding, you go in and you get all the information, you do the cross triangulation.

Alex Shartsis (17:03):

I like that one for later stage companies. I think one of the concerns I have for technical founders is that they sometimes know too much and so they’ll find fault with a good salesperson, because they didn’t know stuff that wasn’t on the website. And so I think that’s one of the risks of having them pitch your own thing, which having them pitch something else avoids. I mean, you can do it as a homework assignment too, so it’s not just an impromptu, in the middle of an interview question, it’s like, “Go give it some thought, pitch us something.” But I think the risk is that a lot of technical founders will over rotate on their own product and then they’ll be like, “Oh, I don’t like that guy, because he didn’t understand what the AI really does.” And it’s like you don’t have that, you recurse with that expert mindset.

(17:53):

Fundamentally, I think having some humility as a technical founder, especially around hiring and sales is really important. And I think one of the things that I talk about a lot is experiments, marketing, everything marketing is, nobody knows what’s going to work and even if it worked six months ago, it might not work now. You have to treat it all somewhat dispassionately as an experiment. With hiring and managing people it’s hard to do, you can’t be like, “Oh, I’m experimenting. You’re an experimental hire, I don’t know if…” You have to have some confidence.

(18:22):

And I think one of the things you said about having an advisor, people like me, us, others out there who isn’t on your board, gives you that confidence of when you go to your board, you’re like, “Yeah, this is our plan.” And you can have much more confidence than, I don’t know, I’ve watched a couple of YouTube’s and then I made it up. It’s like, no, I bounced it off some people who’ve done it before and it seems like it’s going to work. But it’s hard to manage, especially salespeople, if you’re not confident. If you’re like, “I don’t know if this thing’s going to sell, but you should go try and sell it, I think that’d be great. If you sold a couple of million dollars worth of it this quarter, I’d be pretty happy with you.” That’s not a recipe for success.

Randy Wootton (19:00):

And I think the other point you made, and we can move on to your next, what are the problems you see regularly, but I think this is a good segue into it. Is that very specific expectation in terms of what a salesperson should be doing in the first 30 days, first 90 days, and at the end of six months. And so the first 90 days is all about activity and what is that salesperson doing? And they should be able to show you like, “Hey, these are the number of emails sent, the number of calls I made, the number of visits I went, these are the people I connected with. Here’s some of the other, building my pipeline, here’s the opportunities, here’s what I’m thinking about it.” And then the outcomes is the deals that you’re delivering.

(19:38):

So I do think you can start to see even at the early stage of 90 days, if someone’s coming in and they don’t have a sales process in place, that they used at their last startup and they know how to just bring it across. Because you’re super early stage and bringing that to bear, you know you’re going to be in trouble, because you know better than I do, but at some level sales is about a process. It’s about doing the work each and every day, that then generates the opportunity and then you get into the close and get the deal across the finish line in the creative close. But I think that goes to the next point you had made, was that often you find early stage founders aren’t realistic with goals and how to establish the aggressive, but achievable, both for the business and for the individual. Do you want to elaborate that a little bit?

Alex Shartsis (20:29):

Yeah. I mean, I think this is one of the, anybody who’s a founder will empathize with having to come up with a VC pitch deck where you have to make up a bunch of numbers. As you get later and later, it’s more like your bankers put the deck together, or they help you and there’s a model and you’ve done it a lot and you know the numbers. But at that Series A stage, maybe you have some beginnings or product market fit, but a lot of it’s a work of fiction. And I think that one of the challenges there is that once you start getting data in, well, first off, it’s very hard to manage to a work of fiction. I mean, you have salespeople who are depending on their quota to pay their rent, or depending on their commission check to pay their rent. So just making stuff up, it doesn’t really work. And so I think at some point you have to shift from, okay, well, this is what we think is achievable and then make adjustments.

(21:16):

And what I find, people end up trying to solve for what the investors want very often, rather than what the market. The investors want a short sales cycle, so we’re going to sell this thing in two months. And it’s like, well, if it’s a million dollar enterprise grade thing and they have to do a security audit, and there are things that happen, you’re not going to sell it in two months, but you’re going to need 6 to 12, depending on the industry. And so I think early on you want to make sure that you have aggressive goals, but that they’re achievable and that when you learn more, you adjust your goals. I mean, maybe not every week, but every quarter at least saying like, “Okay. Well, this is what we know now that we didn’t know last quarter. How does that impact our plan?” Because what happens is you lose your credibility, you lose your credibility with investors and you lose your credibility with your team.

(22:06):

I remember one company I was at, which had a successful exit and had a great CEO. One day, the CEO, it was 2008, market fell out and the CEO comes in, he is like, “All right. We need to optimize our funnel to get to profitability, that’s all we’re doing right now.” And all of us looked at each other and we were like, “We have a 100 customers paying us a 100 bucks a month. There’s no possible optimization here that gets us to profitability, so we’ll just go do other stuff. That was a bad, nice, very ambitious, but we’re going to go just keep doing what we were doing, because that’s never going to work.”

(22:40):

So I think if you don’t really give some thought to it and be realistic, you’ll lose your team, which is more important, you’ll also lose your investors. You go to so many board meetings and you say you’ll do a thing and you don’t, or go pitch so many investors outside and say, “Hey, we’re going to have 5 million in ARR in six months and you show up six months later and you’re still at 1 million.” They’re not going to trust you.

Randy Wootton (23:00):

I think that’s great. I think on the sales side in particular, one of the metrics I like is the idea of sales velocity and sales velocity, having a sense of your average ACV, your average days to close and your win rates. So how many [inaudible 00:23:17] does it take, because that then informs the pipeline you have to build, but it does give you a sense for what is the profile of the company. Are you a high transaction, low ACV, or to your point, are you more a higher ticket item with a longer days to close? And it’s not that it’s binary, but it’s pretty close, that you’re either falling into one of those two buckets, putting parameters around that, setting expectations with investors and then also hiring salespeople who have that background.

Alex Shartsis (23:44):

Right, exactly.

Randy Wootton (23:44):

An enterprise seller is not going to be the person who’s going to be the high transaction, low ticket type of model. The other thing which you just started to bleed into, which I think is so important, is if the second point is around reality distortion and controlling that, then the third point is around being honest with how you did and investors having long memories. And I tell you, as someone who has had to raise money and sell to companies, I mean, I don’t have a lot of experience, but it is amazing how long investors’ memories are and anything you say, they write it down in their little book. I mean, it’s probably there’s an investor CRM on who you are as a company, and they come back and you may mention something, you’ll say, “Oh, that’s interesting, because you said X six months ago.” So share a little bit more on that, because I think-

Alex Shartsis (24:34):

I think that there’s a reason why the best VCs may not invest the first time they see you, but they like to get to know people. Just like you said, there’s transactional low ticket and more enterprise long sales cycle, bigger ticket sales. There’s also that with venture, there’s some venture investors that show up in YC with their checkbook out and they’ll just write checks, a bunch of them all at once. And there are others that are like, “Yeah. We’ll get to know companies over a year or two. We might pass on the seed and the A, but invest in the B.” A good friend of mine, Emergence, passed twice and then they led their Series B. And so those, you get a sense for people and you really understand more about the company than just like, “Okay, here’s some metrics. Do you want to invest or not? Here’s the valuation.”

(25:16):

I mean, one story I have, which I was front row seat, a founder I worked with sent me this email from a top tier investor that said, “Hey, thanks for sending the deck over. I looked at your deck from January and you said you’d be at 3 million in ARR and you’re only at 300 K, where’s the other 2.7 million?” And the question in the email was like, “Hey, what should I say to this?” And I was like, “Do you think there’s anything you can say that will get them to invest? Because that was a hard no.” That email says we don’t trust you, you’re either incapable of running a company or you lied to us, or maybe both, but none of those things are like, “Oh yeah, here’s $5 million for your Series B.” You lose the trust and so I think that like you said, investors do have long memories and if you don’t, they also discount.

(26:08):

You can put the fictional projections in your Series A and they’re going to haircut them anyway. So if you don’t put the fictional projections in your Series A, you’re doing yourself a disservice, because everybody else made some stuff up. So there’s a balance here, but I think that if you don’t hit them, you need to come back with some learnings and reestablish credibility, as opposed to just being like, “I don’t know what happened. I guess we didn’t get to 3 million, I guess we’re still at 300 K, oops.” I think it’s about how you handle it and message it, but I think the worst thing you can do, which I’m totally guilty of, I did this at one point. I had a CEO coach who’s in Idaho, near you, and I was like, “I think things are going well, but I’m not sure.” And he is like, “Well, you should really double click on that.” And we had just hired this great sales person who had sold $50 million of stuff for a direct competitor, and I felt like we were in a really good place.

(27:04):

And when I really dug in, I was lying to myself about how well we were doing. And I think being honest applies not only to investors, but also to yourself and your team. If you decided, hey, these are the metrics I want to hit, or maybe this product isn’t going to work and you blow through the quarter and you don’t hit those metrics. And this is more for early stage, obviously later stage, it’s a different game. But if you’re at that seed A, B stage and you’re like, “These are the unit economics I need to see, this is the sales cycle, this is the sales velocity I need to see for this to be a good business.” You don’t hit it, you have to be honest with yourself about like, “Okay, I didn’t hit it. What do I do? What are my options? Can we fix it? Should we sell? Should we shut down?” Because you don’t want to keep, I don’t know what bad analogy to use, but if your house is underwater already and why keep at it? Why waste more of your career?

Randy Wootton (28:03):

Well, I think that was so hard, because at one level as CEO, you’re there as the evangelist in the market with the investors for your team. At the same time, you have to have this clear-eyed understanding of reality in terms of what’s really playing out. And I think in those really early stage companies, my experience of participating and advising is part of the way they win, is they’re just dogged at saying, “No, no, no.” They get so many nos, that they’re just convinced that everybody else is crazy and that they have the right way. And if they don’t have that sort of conviction or are able to work all night and seven nights straight, they might as well just pass it off. But there is this moment of where you’ve got to have a clear-eyed view of what’s going on. Are you running a zombie company?

(28:50):

Again, that’s where I think advisors can really help, because they can pattern match on it. And then I think there’s other things that you can do in terms of backing off and setting up experiments. And so what are you going to do this month to show? Are you getting leading indicators, that you’re starting to get a pickup or you redefine the category a little bit and say, “Okay, we were selling to this industry end market, this other one, we think we’ve got more traction.” So it’s almost like how do you focus the experiment down, so that you’re not trying hundreds of different things, but you’ve got a couple that you’re leaning into and then to your point, you could be honest about it. Well, this one worked, this one didn’t. I think investors, those early stage investors have more appetite for people who are deliberate about what they’re trying to do and transparent about how it’s playing out.

Alex Shartsis (29:33):

No, I think, and that’s the winning strategy. I think you’re not going to know everything going into it and if you’re not willing to fail. And I think the honesty really helps your team, if you make a mistake and you choose a strategy and it doesn’t work, if you’re able to say, “Hey, that didn’t work.” To your team, rather than starting blaming people, or fire your marketing guy, or fire your head of sales, or whatever because it didn’t work. Maybe or maybe not, those are the right things to do, but I think that being honest about these are the metrics we need to hit to achieve whatever the next thing we’re trying to achieve is, and did we or did we not hit them, and why? That honest conversation is how you fix it or decide to go do something else.

Randy Wootton (30:11):

And that actually leads to the fourth problem that you find or area people need to focus on is, you described as not catastrophizing and not thinking that everything was crazy. And we just talked about one of the ways to address that is this recognition, that if you break things into smaller pieces, if you use the five why methodology. But maybe talk a little bit about what your experience has been with early stage founders, especially technical founders that are trying to figure out go-to-market. It’s not an engineering problem they can solve, it’s like this broader multi-variant challenge and sometimes they may say, “Hey, everything’s broken, we need a reboot.” But what’s been your experience there and what’s your advice?

Alex Shartsis (30:52):

I mean, I’ve been a founder and so I know, when I worked for a couple of founders, some of whom were very successful with me on their team, some days I go home and be like, “Wow, they’re just crazy today. They took the crazy pills today and is this…” I have one founder, Kleiner Sequoia backed company, actually we’re good friends still. I started on a Tuesday, we had no product, no legal agreements, no nothing. On Friday she calls me into her office at 8:00 PM and says, “Why haven’t you sold anything yet?” And I was like, “We don’t have a product. We don’t have an agreement for people to sign.” I don’t even think we have a bank account for them to wire money to, it’s sort of a weird question. So founders have this wiring that’s just a little bit different, and then I became a founder and I was just as crazy as everybody I’d ever worked for.

(31:37):

And I think that there’s this, like you said, you have to be so stubborn and so committed that you see past this, but you get hit with a lot of nos. And I think what happens is, if you get punched in the face enough times in a row, you start thinking like, oh, this is a waste of my time, it’s over, it’s not going to work. I’ve been trying this, whatever, sales process, marketing message for three months and it just doesn’t work and I just need to quit and go home. And what I’ve found is that science is still science. If you break it into smaller problems, you can probably solve one of them, maybe two of them, and that might be all you need to make the whole thing work.

(32:13):

And so especially when you’re talking about go-to-market motions, whether that’s your ad funnel, whether that’s your sales process, maybe you’re like, “Oh, our product, there’s no product market fit, it just doesn’t work.” And it’s like, “Well, actually you’re charging a 100 bucks a month. If it was 50 a month, or if it was packaged a little differently, or if it was five grand upfront or something, it would not work.” The way your client’s budgets work or the way their expectations are. And so I think that catastrophizing is really this thing that I think founders mostly do when they’ve been punched in the face a lot, it’s not working and they just think the whole thing is broken.

(32:49):

And the way I work with people on it is to really break things into smaller problems and turn it more into an engineering problem. Let’s break this into its component parts, run two or three experiments, not all of them, not throw the whole thing out and do it all over again, but figure out what key areas we think are most broken and try and fix those, and maybe that unlocks the system functioning properly again. I mean, I think that’s a way to run a business, you’re just constantly innovating and making things a little bit better each day. And I think that you really get into trouble when you’re in that seed A, veer out, do your runway before you need your next round and you get punched in the face once or twice and all of a sudden it’s like, “Oh, I’m never going to be able to raise the round, we should just sell for whatever we can get.” And like you said, you have to have a lot of grit to be a founder and get that far, but chances are if you raise a Series A, something’s working.

Randy Wootton (33:47):

And you got some people you can tap into, and I think having an investor, having at that stage, you probably won’t have an independent board advisor, but having people you can talk to come off the edge of the ledge is super important. Well, last probably topic before we get to the speed round, we’ve covered really three things that founders could focus on. One, don’t do everything, but when you’re trying to scale yourself, really having discipline around focusing on the hiring person, setting them up for success. Number two is around the being realistic with the goals and being honest with how you did. So both with yourself, with your team, and there’s different honesty and transparency that you share for each of those stakeholders. And then number three is really around that, not catastrophizing, is keep it clear, break it down. Take the big problem, the big rock and break it down into component pieces, create experiments, move something forward, get insights and iterate quickly, fast fail and all that.

(34:46):

One of the areas that you spend a lot of time on with your clients and where we’ve had some overlap with Maxio is the idea of revenue operations and how do you think about building that as a discipline? And so did you want to talk a little bit about when is the right stage for that seed Series A company to introduce tools? Because sometimes they go in and buy a whole bunch of tools, but they never use them and become shelfware. And so what is the set attack that you think is really important for people to set up a go-to-market engine? So it’s not just a single salesperson, but a revenue operations.

Alex Shartsis (35:17):

I think that this is a really important point. I think there are a lot of companies that get the tools, because like, “Oh, everybody, all the best SaaS companies use Maxio, so I’m going to go get Maxio.” And then they don’t really need it and it becomes a distraction versus, I mean, I was talking to a VC about this the other day. They did a Series B recently on a company, their entire CRM was a Google Sheet, and it seems wrong, but I’m like, “Oh, that’s kind of cringe. Why would you?” But then it’s like, “Yeah, but you raised a Series B, so you must’ve been doing a lot of other stuff right.” Versus I’ve worked with companies that have perfectly tricked out Salesforce or HubSpot implementations and no sales. And so you’d rather have the revenue and raise the Series B and then go install the tools than the other way around, not get the Series B, because we spent all our time messing around with tools.

(36:06):

I think that, I mean, you start to know it, to me, they’re probably numbers, 1 million, 5 million. They’re probably revenue numbers where if you’re at a certain scale, now the cost of doing stuff by hand outweighs the cost of automating it. But I think that entrepreneurs frequently underestimate the value of automating the revenue operations process, every process, but especially things that bring cash in the door, because the fewer hands that touch it, the faster the cash gets in the door. And so the less variability you have as founder, CEO, around what happened, the less people you have to go track down and figure out like, “Hey, there’s that 50 K check that I kind of need to make payroll at the end of the week. What happened?” If it’s all automated, it’s just a lot smoother.

(36:55):

So to me, I think it’s almost at that, when you’ve got those 10 customers, it’s a repeatable process. I would start thinking about revenue operations shortly thereafter, because you want that first truly professional sales hire to hand sales into a process that is smooth and that includes payment, that’s an important part of payment and then it’s also a much simpler problem. You probably have one flavor of subscription if you’re a SaaS company, or one metric that you’re tracking from a billing standpoint. So you might not be getting all of the value of a platform like Maxio, but it’s also a lot easier to get it set up and going. And then as you grow with that, you have that platform to build on. Whereas if you come in when you’re doing 10 million, you have 15 custom deals, it’s a much more involved process to build it out. The ROI is still there, but you don’t have the history, you don’t have the foundation that you would’ve had if you did it earlier.

(38:00):

So to answer your question succinctly, I think it’s once you have a repeatable sales process, I would start thinking about revenue operations. But until you have a repeatable sales process, it’s not a good use of your time. You need the top of funnel and closing to be repeatable before you start worrying about automating it. But I think founders make a big mistake by underestimating the value of automation, it goes beyond just, “Oh, we got the cash two days sooner.” It’s like you sleep at night better, because it’s well tooled and it’s well oiled and it’s working and you’re not surprised by like, “Oh, wait.” I mean, one of my clients had this problem where somebody didn’t send a renewal notice at the right time and $1.2 million showed up 45 days late, that’s kind of a big problem.

Randy Wootton (38:45):

Especially in early stage and all stages, cash is important, but until you have enough buffer where you could have a delayed payment and absorb it versus you’re not making payroll. And I do think your broader point in this idea of founders believe in the front office, I’m going to go buy, I’m going to get some marketing tech in place, because I got to get up on LinkedIn and do Facebook ads and go more broadly. But then how do you think about scaling the back office? Because often you don’t hire a CFO out of the gate. You have your uncle or your aunt who’s doing your bookkeeping, and then maybe you get a CPA firm who may not have SaaS experience and so they’re just doing the very brief controllership.

(39:27):

But then when you get to seed or Series A and certainly by Series B, and you’re going to have investors who are coming in and want to look at those multiple contracts and understand what happened, and see how that’s playing out in terms of the ARR and the rev rec. Having that back office not as sophisticated as you would at a 100 million bucks. But I was just talking to a guy, Nathan Latka, you probably know him, the guy of Founderpath, he does all this stuff out there and he says, it’s just crazy, when they go in his new company and they’re trying to provide debt, how much easier it is when people have that stuff sorted, to be able to turn around and provide debt in days, not months. And so I do think, to your point, the founder balancing and thinking about, again, maybe seeking advisors, or what are the systems you put in place and the processes that you want to automate on that quote to cash so that you’re not chasing contracts.

Alex Shartsis (40:18):

One company I worked with, I showed up in April, we discovered that they hadn’t billed any renewals all year. And I think some of this is when you raise a bunch of venture money, you can pay payroll without collecting a bunch of $20 and 90 checks, and so you don’t notice it, but it’s still really unhealthy. And they wanted to go raise a Series A and I was like, “Guys, until you fix this, everything, not only the revenue recognition and the accounting problem, but also the actual get the cash in the bank problem.”

Randy Wootton (40:49):

Yeah, get the collections.

Alex Shartsis (40:51):

As soon as somebody does diligence, they’re going to walk away, because what company doesn’t collect anything for the first quarter and a half of the year? That’s not a good look. And so I think one of the things that the tools do is they give you some of that forcing function to mature as a business. And I think one of the biggest things in the current market is it isn’t growth at all costs anymore, you have to run the company like a business and I would argue that a lot of the companies for the last 10 years weren’t run like businesses.

(41:26):

They had a billion dollars in the bank and they’d go spend 10 million a month net, maybe 20, maybe 50. And it’s sort of like, “How long until we can’t keep the lights on? Okay, the torpedo is full speed ahead.” And now that it’s like, “Oh, I don’t care if you’re Airbnb, you need to turn a profit.” I think the tools on the revenue ops side of the house are an important forcing function and enabling function. They force you to actually give some thought to it and then they enable you to actually track the metrics that matter.

Randy Wootton (42:01):

I think I couldn’t have said it better, that whole distinction between growth at all costs and efficient growth, and if you have a mind on profitability and then to your point around managing the cash is that’s the number one responsibility. Well, great, we’ve hit that round. We’ve hit that time where we’re going to go into the speed round, three questions. Favorite metric and why, favorite book, could be business or personal, and then favorite influencer, someone that you’re following that you find is creating compelling content and not just spinning what’s already out there. So favorite metric.

Alex Shartsis (42:29):

So my favorite metric, there are a lot of metrics that are useful. I think revenue is a much more important one and people like to talk about NRR, for me it’s CAC payback, which is customer acquisition cost payback. So for whatever it costs you to get a customer, how quickly, usually in months do you get that money back? And there are metrics that investors talk about, if you’re in consumer, it should be a month, if you’re an enterprise, it could be 6 to 12 months. But I mean, it’s like is this a business or is it not a business? And if your CAC payback is three years, it’s a business, you need to do something differently.

(43:05):

And so I think a lot of very early stage founders avoid this one, because it’s like, “Well, I don’t spend anything on marketing. Look how great we are.” It’s like, I don’t know, you have two people in your marketing department, so it seems to me like you’re spending, and you spend half your day on LinkedIn, it seems to me you’re spending something on marketing. I think the earlier you can put a number there and really think about it, the faster you can do that efficient growth and if you’re avoiding that number, I don’t think it’s healthy.

Randy Wootton (43:36):

Absolutely. Just underscoring your point, one around, making sure you’re allocating all the costs. It’s not just the dollars you’re spending on Google search, it’s the people’s time, it’s the salaries and so it has to roll in. There’s one of the people I like a lot, have immense respect for is a guy named Ray Rike and he runs Benchmarkit, and Benchmarkit, he surveys 2,000 companies and he’s able to split out by stage and by ACV what the metrics are and what the benchmarks are, and what’s best in class versus mid-market versus bottom quartile. So people can go and look to see where they are, what stage company, what is their average ACV. I think he even has a split out by industry now to find out, well, what is a good benchmark? To your point, it could be one month, it could be 12 months, it could be under 24 months, I think is the parameters, especially early stage companies. But I think in general at seed Series A, it’s got to be under 12 months, got to be under 12 months.

Alex Shartsis (44:34):

Well, yeah, I mean, you don’t have 24 months to wait, you’re out of cash in 18. So cash 24 months from now does you know good and I think that metric really captures that and it also helps you figure out how to allocate your time. Am I going to spend time building the enterprise feature for that company that’s going to take 24 months to pay back? No, that’s not a good use of your time if it’s a seed stage.

Randy Wootton (44:57):

Well, great. All right. Second question, favorite book and why?

Alex Shartsis (45:00):

So I really like negotiation books. I think one of my favorites is Getting to Yes, because it really talks about asking questions and I think as a tactic, one of the tactics I talk to technical founders about is asking questions. A lot of the times they know more, they like to have the answers, but when you’re in a sales or marketing context, it’s helpful to ask questions. And Getting to Yes really talks about how, I mean, if you don’t make assumptions about what the person on the other side of the table is willing to spend, et cetera, you can actually get a lot further by and get more people to agree. So I like that, there are a number of really great negotiation books, they all have different flavors of the same thing. But goes back to business school, and you probably did this too. There’s a case study where everybody negotiates and then at the end they tell you what everybody’s actual willingness to pay and we all screwed up. Everybody was so bad, but you thought you were so smart, you’re like, “Oh, I totally took that guy to the cleaner.”

Randy Wootton (46:01):

I’ve optimized my value.

Alex Shartsis (46:03):

Yeah, it turns out you could have bought it for free and he could have got a million dollars from you and everybody lost. [inaudible 00:46:10].

Randy Wootton (46:09):

I think that idea of how do you lead with inquiry versus expertise is probably one of the biggest challenges for technical experts who’ve been throughout their life, the smartest person in the room. And part of them being a founder is they’ve identified a problem that no one else has seen, and then they, to our earlier conversation, have had to deal with no, no, no, no and so they’re always having to tell why they’re right and justify. And I know for me too, that’s been super hard. I remember I went through some sales training and they said, “You have to channel your inner Columbo.” That old TV show about the inspector who bumbled around, but he asked these questions and you weren’t really sure why he was asking the questions, but he always closed the case at the end. But people really discounted him, because he was like the absent-minded professor profile.

(46:55):

And not that salespeople have to be that, but I think in channeling that that idea of what you’re trying to do is have the prospect tell you what they want to tell you, and explore their ranges of willingness to pay, or their pain, or what’s valuable versus just coming and saying, “Oh, well I’ve seen three people like you, let me tell you exactly how we solve their problems.” So I think that’s great. All right. And then the last couple of minutes we have, your favorite influencer and why.

Alex Shartsis (47:23):

So I’ve been spending more time on LinkedIn, perhaps more than is healthy lately. There are a couple that I’ve seen that I really like in this entrepreneur space. Adam Shaw does a lot of marketing advice for bootstrap founders, which it’s just really practical. Here’s how you get more leads from LinkedIn, here’s how you get more leads from Google, it’s very, very practical hands-on stuff, really like what he’s doing. I’m perplexed by a guy named Adam Robinson, who has for enterprise companies, he has a company that competes with Clearbit, so it helps you find who’s visiting your website so you can then go reach out to them. It’ll actually post their LinkedIn’s through your Slack profile, which is sketchy, but also pretty amazing. If you’re a salesperson, you’re probably on the pretty amazing side of it. If you’re a normal human, you’re like, “Oh, that scares the crap out of me.” But I’m very much on the pretty amazing front.

(48:15):

But it’s interesting, because given that controversy, he’s built a tremendous following in LinkedIn, leaning into how controversial it is. And so it’s interesting to see, and again, very specific takes on stuff. I think one of the other interesting things about Adam Robinson, is this is the second or third multimillion dollar ARR business he’s built without any venture. And so his perspective on like, “Hey, I built this to a million in ARR in 16 weeks with zero venture raised, five people, no investment.” I mean, obviously he’s putting a bunch of his own money into it, so your mileage may vary. But I think that it’s an interesting counterpoint to the, oh, once you get the sales velocity, you should go raise your $10 million Series A, or you don’t have to, or you just reinvest and grow organically. So those are two that I like, and they both happen to be named Adam, there’s no reason for that.

Randy Wootton (49:12):

Well, great. Well, Alex, thank you for your time, appreciate your thoughts. You’ve certainly been around and seen lots of different things, and if people were to find you and want to ask more questions about you and your company and consultancy, LinkedIn is best or do you want to-

Alex Shartsis (49:27):

Yeah, silverwood.ai on the web. LinkedIn, just Alex Shartsis. There’s only one of me, I’m easy to find. And I post up a bunch, there’s a newsletter with subjects like this.

Randy Wootton (49:38):

Great. Well, thanks for your time, Alex. Always great to catch up.

Alex Shartsis (49:42):

Thanks for having me.