Join host James Mackey and his guest Doug Landis, Growth Partner at Emergence Capital as they discuss the tech industry’s changing risk tolerance, adaptability, and smart decision-making for leaders. What is the impact of unit economics on bootstrapped organizations? Which compensation strategies can companies use amid high inflation?
The answer to these questions and more in this engaging episode, including how you can achieve transformative success with Northstar metrics.
0:42 Doug Landis’s background
2:18 Challenges in hiring and scaling businesses
12:34 Challenges for startups and compensation strategy
23:22 The importance of a people-first culture
36:08 Importance of investors in company positioning
41:58 The importance of having a defined process before hiring
Thank you to our sponsor, SecureVision, for making this show possible!
Our host James Mackey
Follow us:
https://www.linkedin.com/company/82436841/
#1 Rated Embedded Recruitment Firm on G2!
https://www.g2.com/products/securevision/reviews
Thanks for listening!
Join host James Mackey and his guest Doug Landis, Growth Partner at Emergence Capital as they discuss the tech industry’s changing risk tolerance, adaptability, and smart decision-making for leaders. What is the impact of unit economics on bootstrapped organizations? Which compensation strategies can companies use amid high inflation?
The answer to these questions and more in this engaging episode, including how you can achieve transformative success with Northstar metrics.
0:42 Doug Landis’s background
2:18 Challenges in hiring and scaling businesses
12:34 Challenges for startups and compensation strategy
23:22 The importance of a people-first culture
36:08 Importance of investors in company positioning
41:58 The importance of having a defined process before hiring
Thank you to our sponsor, SecureVision, for making this show possible!
Our host James Mackey
Follow us:
https://www.linkedin.com/company/82436841/
#1 Rated Embedded Recruitment Firm on G2!
https://www.g2.com/products/securevision/reviews
Thanks for listening!
Hello, welcome to the Breakthrough Hiring Show. I'm your host, james Mackie, very excited for today's episode. We are joined by Doug Landis. Doug, what's going on?
Speaker 2:What's up, James? Nice to see you, my man.
Speaker 1:It's good to see you too. This is great. This is going to be round two for us.
Speaker 2:Indeed. Well, I guess we got a lot to talk about, or, better put, we got a lot to say.
Speaker 1:Yeah, we got a lot to say. We'll see if people like it and before we jump into it, would you mind sharing your background and experience with everybody, please?
Speaker 2:Yeah totally so. I'm a growth partner at Emergence Capital. We're a B2B focused SaaS venture firm. We focused on early stage, so it's series A, their sweet spot. We made a bet 20 years ago that all software was going to move to the cloud. I think that was a pretty good bet, with bets on Salesforce and Box and Viva and Yammer and Steelbrick and SuccessFactors and Zoom and billcom and I mean we've done okay.
Speaker 2:My role is interesting and amazing in the fact that I sit on an investment committee and help us to source deals and do due diligence and deals. But more specifically, I help our companies figure out how they're going to scale and grow from a half a million to a million in ARR to 10 to 30 to 60 to 100 and beyond. And if you want to kind of break down my world into a couple buckets, one is clearly a lot of one-on-ones of our portfolio executives, whether that's CEOs, heads of sales, heads of marketing, heads of CES to help them not only just think through their strategy but just really break it down and hone in on how we're going to execute against the strategy. How are we going to go from four to 12, which arguably is one of the most difficult tranches to get over. But beyond that, a lot of it you could argue probably 30% of my time is on hiring, interestingly enough and I got to say getting involved in an emergency almost seven years ago I actually I always knew hiring was important and difficult. But, holy smokes, and the role that I'm in now, when we invest in a series A stage company and it's almost one of the very first things we have to discuss is, okay, what critical hires do you need to make?
Speaker 2:And we can usually tell when we're talking to founders as they start to kind of map out who's on the team. We're like, okay, we kind of know where the gaps are. We know, arguably, what you need. Finding the right person with a right skill set for that company at that stage, regardless of industry, is tough. It's tough. A year ago, two years ago, it was hard because there were not enough people on the market, right, the people that we really wanted we'd have to go out and find. We'd have to go out and do some real digging. Now the flip side is there are a ton of people on the market. Then now we've got to filter through all this noise. I'm like, okay, who's really good, that's on the market that maybe their company that they were at just took a wrong turn, so it's so critical.
Speaker 2:Yeah, it is, it's bizarre, it's super bizarre. Well.
Speaker 1:I think it's like too. It's like, as you said, you're filtering through noise. But the other couple of issues too is that if somebody has job stability in their current role in the tech market, they're less likely to risk. Tolerance has changed, yeah, so that's a problem. The other thing at tech is that a lot of the times people jump to a new job because of a big salary, a potential for a big salary increase, and, like sellers have stagnated, so there isn't that incentive to move either.
Speaker 1:And then the third thing is that there are people are like well, there's more good people off the market. It's like, well, yeah, but if you're looking at particularly director level and up, these folks, when they got laid off, got huge severances and they're taking their time. A lot of them are just saying I'm just going to stay out of the market for the next six months and ride this out until there's more opportunity. So there's just so many combinations of factors that I mean overall like yeah, I honestly like I think it is a little easier to recruit in this market. Like sometimes I'll see like an agency recruiter CEO like do a post, like oh, it's just as hard. I'm like, no, it's not bad, it's just it's not, it's a different kind of it's a different level of difficulty.
Speaker 2:Here's like for us. You know what's really interesting is. You know we're doing way more back channeling because the people that are on the market that happen to be available maybe they left their last company, maybe they got like a part of a riff, what have you?
Speaker 2:it's like we really want to understand more, because the truth is, in this environment right now, we're super focused on, you know, capital efficiency. We're focused on you're going to economics, profitability, et cetera, where before is growth at all costs we can't get a higher wrong, because the financial impact in the business right. And we know that what we're struggling with right now, at this stage in our companies, is different than what we were struggling before. When it's super frothy, you're like, okay, we need somebody to push and scale, scale, scale. Now we need somebody who's actually really smart and and you know, understands how to grow, you know good kind of core fundamentals in mind.
Speaker 2:And here's a here's the crazy thing. It's also let's just consider this 14 years of frothyness, all of those sales, so many of those sales leaders, or even go to market leaders, or last 14 years have never seen anything like this. And this is the time where, like the real gritty, you know, sales leaders come out and these are the people that I want to hang out with because it's like all right, how do we readjust? Is that? And that may mean we got to readjust who we target and why? May mean we reorient our messaging to our buyer personas.
Speaker 2:It means changing our pricing and packaging, meaning it changes some aspect of our product, because we've got to pivot a little bit, because our target customers that were our target customers a year ago have like shifted and so, like I want a leader that knows how to think through those, those, those elements, the business. I want a leader that understands how to build a business based on solid fundamentals, versus someone who's just used to like grow, grow, grow, higher, higher, higher, grow, grow, grow, grow, right. So it's just it's kind of a different profile Now, if you think about it. So to me it's to me it's difficult in that regard, just because it's a slightly different profile versus the okay we got. You know, yeah, particularly at the leadership level at the leadership level.
Speaker 1:it's, it's absolutely, yeah, it's so challenging.
Speaker 1:I think one of the things that's really challenging for leaders right now is we need to be adaptable. But we need to be adaptable and smart ways that, when it comes to our value propositions, the our product roadmaps or services, how we're positioning, you know, pricing and everything else, and there's so many intricacies when it comes to, well, what are existing customers, how are we packaging to them? Are we pricing to them? What can we reasonably do to adjust potentially pricing moving forward, or how we position the product moving forward. It's that, of course, like how all of those things can impact your unit economics and, and there's just a lot of things that have to be. You have to anticipate and, at the same time, you have to move quickly If you want to make sure that your your win weights, when, when rates don't plummet or you're losing more deals to your competitors because they adjusted faster, and so it's there's just a lot to to think about and, you know, having experience, I feel like has never mattered more Like this is.
Speaker 1:You know, sometimes I feel like, maybe more in a growth market, maybe there's maybe that's just a little bit different of a profile where you can say, okay, find somebody who's just really good at these one or two things right, and then we don't really care if the other things aren't quite as good, whereas now it's like being well-rounded and being good at critical thinking, good at logic, analytical, and being able to quickly come to logic or reason-based decisions that are going to allow you to make decisions fast enough to try to survive or, ideally, thrive in this market. It's a lot more complicated as a leader these days.
Speaker 2:Think about this a healthy pipeline solves all problems. Right, like as a sales leader, you got a healthy pipeline like you don't really even need to be that good, you just need to be solid, right? But guess what? Pipeline right now down for everybody. Net new logo pipeline is down for everybody. Most everybody's thinking like my growth is going to come. I'm going to hit my numbers based on my expansion, upsell existing customers, keeping them happy, not losing them, pushing my net dollar retention numbers up. So, like with an unhealthy or difficult pipeline, that's where you really start to see people's skill set.
Speaker 2:Like what can you do as a sales leader? Do one, make the business more efficient. Two, focus on really targeted tactical outbound. What does that look like? It's no longer forget about these old phrases, the personalization at scale. No, it is like I'm reaching out to you, jane, specifically, and I'm not stopping until I get the right timing and relevant message to you and, at a minimum, even if you say no, I'm like all right, at least I got an answer and it's that grittiness that really exists in leadership today.
Speaker 2:Interesting question that I ask perspective sales data right now. It's like okay, how are you going to calculate cost of the sale. Walk me through that right now. I don't want you like. Just this is the stuff you need to know. Because here's the thing when you join an organization, or if you're in an organization right now, you need to understand how much it costs you to land every single customer, not only from the fully loaded cost of SDR, ae, se, if you have them, but also the support costs. And if you don't understand that, then you don't really understand the margin that you get to play with in terms of your discount rates and whether or not this customer is potentially going to be a profitable or unprofitable customer for you. Because again, if we're getting back to fundamentals and unit economics, that stuff matters when it's really frothy. You're not thinking about those things, you're just thinking about growth. You don't.
Speaker 1:And then in my business it's like a bootstrapped organization on the services side right For those tuning in it's Secure Vision, contract Recruiting, Better Recruiting, rpo.
Speaker 1:For us it's like, as initially bootstrapped, we always have to be thinking about the unit economics because there's no investment capital or cash flow and so it kind of forces us to grow sustainably. But one of the things that has been incredibly difficult is our, like cact to LTB, customer acquisition costs, to lifetime customer value. Those metrics are getting so skewed that there are channels where literally the cost has increased to the point where it doesn't make sense for us to pursue those Because, like, where the lifetime value is going down, people don't have to hire as much, our contract length and price is going down and at the same time the cost of acquiring customers is going up. And then it's like, okay, well, even if we acquire this customer, we're going to lose money or we're going to break even, and if we have a break even contract, that means that we're taking time that we can be spending on profitable customers on break even contracts.
Speaker 2:And it's like no.
Speaker 2:Yeah, but that's the way that right now. That's the way go to. Market leaders need to be thinking Right. They need to be evaluating the customers that they're going after, because the reality is it may cause them to shift. Like you know, we've been going after these market segments and, to be honest, as you unpack it, you look at the numbers and the data. We really shouldn't be because it's over the long, over the long run. You, like you know, our lifetime value of that customer is actually significantly lower than what it needs to be in order to cover our costs for, for, for these hires.
Speaker 2:That we need to make.
Speaker 1:It's really it's. It's pretty wild, I think I don't know what are your thoughts on on the market right now. I guess this is like speculation, so we don't have to spend too much time here, but I you know, we recently had Sam Jacobson at Pavilion and he was saying you know, potentially another nine months of this stuff is kind of what he thinks. I mean, are you what?
Speaker 2:do you think? I think so. I mean, look, you know, until interest rates start to come back, and still until they start to come back down, things are going to be tough, right, because access to cash and capital is in your heart and, to be honest, I believe in the last half of this year we're going to see it. Just, we're going to see a lot of startups just get decimated, because look, a year and a half ago, we're all telling everybody, we're the message to all of our startups, all of our founders, is like don't run out of cash, you're going to have 12, 18 months of runway in the bank. Guess what? We're already at that 12 to 18 month window for a lot of these companies, and going out, raising additional money right now with depressed valuations or down rounds, is becoming exceptionally difficult. And so if you don't have enough cash in the bank and you've got to go out and raise money right now and you can't go out and raise, or you're raising it terrible valuations, or existing investors are frustrated and annoyed, and the new investors? You know they're basically betting on a long play, which isn't terrible, but but the reality is there can be a lot of companies that just can't raise and so they're not going to be able to raise and so they're going to go under. And we're going to see I think we're going to see a lot more of that over the next six months.
Speaker 2:Because interest rates for all I'm not an economist, I listen, I hear I don't think they're coming down, at least through the, through the rest this year I think we got a couple more. We still got to stabilize. I think we got a couple more more, more blips, which just means again getting access to cash is going to be really difficult. Hence the reason why we need to get back to fundamental and profitability and profit more profitable customers, because if you need to fit yourself up to where you don't need to go out and raise capital right now because it's going to be really painful for everybody.
Speaker 2:You know everyone's losing a ton of value and it's not going to. You know what I worry about is like. So things start to pick up the beginning of next year and next thing, you know, the market clicks off and all of a sudden we find ourselves in this situation again. You know, two years down the road, I don't think that's going to happen, but there's definitely. I mean, I feel like people are really, really hungry to kind of get back to the frothy times. But there's just some some, you know, global kind of economic situations that are going to keep us depressed for at least another six months.
Speaker 1:I think it's kind of the beginning quarter of next year, springtime P Well you know, I'd love to get your thoughts too on just compensation strategy as how that, how that plays into the greater economy and, honestly, the growth strategy or sustainability strategy of organizations. I mean, do you have any just high levels? Do you have any thoughts of like compensation in this market?
Speaker 2:Well, I mean, you know, unfortunately, a compass kind of one of those things where you know it, once it goes up it's not going to come back down to where it was before, it's just once it's up there. It's up there, it's kind of it's. So you said it really it's stabilized, like it's not going up from where it was six months ago or even 12 months ago. People are not getting more comp. There are comp adjustments that are being made. They're more stronger adjustments being made. If you're, if you are in a hybrid environment and you're living in Washington DT or Tennessee, as an example, there we're going to make some their comp adjustments being made for for those markets and those market rates. Again, once really frothy, those those things tend to not be as critically important. But right now everyone's trying to manage you know their burn and and what they feel is appropriate. So it's getting a lot more. Comp is getting a lot more scrutinized. Right now I could see companies kind of being a little tighter even with, you know, with base and variable if you take a rep. But maybe once they get to 100 percent of their number, then there's more upside Like. To me that's a safer play. It's like cool, I'm going to make this from a cash perspective.
Speaker 2:Overall, maybe your OTE is less than what it used to be, but once you get to 100 percent, I'll give you I'll give you a faster accelerators, right, so that, because I really want you to get to 100 percent, because we've been struggling like the unfortunate thing right now is, while we have all these compromises, if you think about it collectively people aren't hitting their numbers.
Speaker 2:They're just not Attainment numbers. Whereas before I think they were in the mid to mid 50s, maybe low 60s, they're probably down in the 30s and 40s right now. Look, whatever your comp package is, if you're not hitting your number, you're not getting your full OTE. It's a lose-lose for everybody. If you're in a well-paying job right now and you're able to close deals and you're getting close to hitting your number and there's still market opportunity in this company and they're going to be around for at least another 12 to 24 months, don't go anywhere. It's kind of bonkers, because if you go somewhere, the likelihood is you're going to get paid less. There may be more upside, but the likelihood is you're going to get paid less. What do you see?
Speaker 1:I think yeah, I mean I don't see for most roles right, we're not seeing base salaries decrease. But I think a lot of folks don't think about this is that you don't need salaries to decrease for salaries to return to a healthy mean in the market because of high inflation, like if a salary 100k salary stays the same we have a 7% inflation rate.
Speaker 1:Right so as long as, over time, pricing increases, salaries will probably stagnate a little bit longer. We're going to return to this balance where it doesn't screw up our margins quite as much. But, yeah, I think that it right sizes itself. That's why it's like when some type CEOs will ask me whether it's the CEO event down in Miami that we had, where we actually met in person for the first time yeah, absolutely. I just remind them like look, you don't have to artificially try to figure this out. The market's just going to guide this. The salaries are going to right size, are going to return to a mean. They're not going to just infinitely go up. That's just not just like how growth doesn't infinitely go up at a market cycle. It's the same with salaries. So it's not something that I'm overly concerned about, but I do get concerned, I guess, when there's too much emphasis on trying to lower compensation. I'm also a advocate typically for and there's probably some people that oppose this I'm an advocate of doing deeper cuts and not decreasing salaries.
Speaker 1:There's some organizations that lower salaries and keep on the full staff, because my perspective is I'd rather keep my top players, lower their anxiety as much as possible. I don't want my A players stressed about if they can pay for groceries. I want them focused about stressing about are they going to be able to retain my customer, and so I would rather cut deeper and maintain a quality of life for my core people. And also they're fighting inflation. So it's just like for me and, believe it or not, I am a huge proponent of a people first culture. But the way that I see it is that if I cannot make the right analytical decisions in the short term, then nobody has job stability. So I'm not saying there aren't exceptions. I know there are exceptions, but I think it's a general rule of thumb. I think that that's an important strategy that, more times than not, is going to serve a company well.
Speaker 2:personally, yeah, I mean, it's totally up to the CEO and the board and their philosophy, because the counter to that is well, I don't want to do layoffs right, because I want everyone to feel safe and secure, and so, in order to do that, our executive team needs to take a little bit of hair cut. Ok, I mean, does that balance like?
Speaker 1:I think it's like on an executive level, like you can show that everybody is sharing the impact of the economy. I think that's a little different. But if I'm looking at an individual contributor level, like.
Speaker 1:I think that a better way to operate a people first culture, to preserve the culture and help people feel safe, is when you do the layoffs, have a good exit plan in place for the folks that are affected, helping them land new jobs through the network, putting together services for them. If you're financially able to providing severances, if you feel like you're able to do decent, good severances, do that, because a lot of companies, I don't think, necessarily think about this. But your severance package and your exit package that you provide is just as much for the people who stay as for the people that leave, because the people who stay want to know that, if something were to happen again, how you treated those folks. Not only were they friends with those folks, but what financial situation are they going to be? Are they going to be able to land on their feet or are they just going to be on the cold?
Speaker 2:Yep, it's good for morale. I was talking to one of our CEOs the other day. They had to do a RIF and it was really interesting. He took a pretty progressive approach to it. He let everybody know a month in advance that this is coming and he let everybody know the process in which they were making these decisions and arguably so, basically, and they were giving people and then during that month they also gave people. If you want to opt out, you are welcome to opt out yourself, right.
Speaker 1:Yeah, if you want to be a senior.
Speaker 2:Yeah, the people who ended up opting out and taking the package, because they put together a package for everybody and they shared what the package was going to be. The people who opt out were already likely going to be chopped anyway, but what it basically did is it preempted all of the nervousness and the chatter around layoffs and this, that and the other, and they were very transparent about what was going on. And when that happened, it happened. Everyone was like OK, we've been expecting this, it's happened. We gave people a chance to opt out. So basically, those of you that are sticking around that we've chosen to stick around, and you've chosen to stick around because it's a two-sided conversation here. We're all in and it's time to go. Now, on Monday, it's go time, and so the amount of buy-in that he had from everybody that stuck around and the people that are still there was super impressive, like they didn't skip a beat.
Speaker 1:Well, it's just so important, Like transparency is so important, like whatever your strategy is, being transparent about the company's financial situation, the strategy and a down market. How are you we actually have a really good episode coming out on the show, too that we also dive into this more, but I think it's just like the whole transparency factor is just critical. And then again, it's like being thoughtful from the people perspective and trying to provide as many resources within the ability of what's financially sustainable, given your situation, of course. But yeah, I mean I could see that working for your CEO friend. I mean, I definitely tried to do that as well. One of the things that's tricky is there was so much instability. It was like we think this is probably two months out, this is what we're seeing, this is what we have to do to prevent it.
Speaker 1:Of course, we do everything we can, so it was like for us, it was harder to.
Speaker 2:You can't anticipate it. So, instead of like we think it's like no, we're going to. We're going to. So be definitive, be transparent, make the cuts and move on. And unfortunately, go deeper, because you don't want to have to come back and do it again.
Speaker 1:Yeah, I think we're all filled.
Speaker 2:Okay, no, I was going to say also to be very careful about optics. Many companies that we know out there, very big public companies, like at these big rifts and layouts, and then you hear murmurs about these big bonuses that were paid out. Now, granted, those are bonuses that were already set in place based on specific milestones. They were already there. They've already been there for nine months, or at least the last seven months of this year. But optically, just to hold off on the bonuses, tell everybody that's going to get a bonus, be like we're going to hold off, You're still going to get it. But we want to be mindful of the optics of this because we're doing it, we just did this big riff. It matters because people make assumptions and presumptions of the company and the culture based on little things like that Work is out.
Speaker 2:You're like hmm, really, yeah, you really roll in the dice.
Speaker 1:if you choose to do that in this market, totally.
Speaker 2:We talked about it before. Look, the people are the most important part of your business. I was sharing with you before we got started is look, in the venture world. The thing that I've come to realize is we're not finance people, we're not technologists. We invest in people at the end of the day. So yes, we are in finance and yes, we are in tech, but, at the end of the day, at the core of most venture investors is we're investing in people that we think can change the world, and our bet on you is that we're betting on your ability to go on a higher and amazing team to support you and, if you think about it, that's really what drives. That's the heartbeat of every organization. You've got great leadership that hires other great leaders, and those great leaders know how to lead through all sorts of crazy times.
Speaker 1:Right, I completely agree and actually it's kind of funny. I recently did a LinkedIn post and it said recruiting isn't a segment of your business, it's the core of your business. Nothing great has ever been built without establishing and empowering an amazing group of people. It was funny because, for some of it how LinkedIn is, for some reason some people are offended by any and everything. So I'd get like they'd be like no, go to market is the core, products the core. And then I just like respond Like you can't my argument, like you can't fight against it, because I'm like well, let's go to market Totally. People like who builds product People?
Speaker 2:You know.
Speaker 1:So like, it's just like, and they're like well, you know the wire town acquisitions, the first girl recruits, they're first get laid off. I'm like that's. I'm not talking about the, the, the department of town acquisition.
Speaker 2:Yeah, I'm talking about the core of the business.
Speaker 1:Yes, getting people on board to accomplish the mission.
Speaker 2:That's so true. It's so true. One of my colleagues she runs talent for our firm, tammy Haun. It's interesting she always says, you know, and anytime we onboard a new company, you know, one of the very first questions that's always asked is, like, what is your hiring strategy? And oftentimes it is misconstrued of like, oh, I have to make these two hires. It's like no, we don't care about those two hires. What is your hiring strategy Meaning? At what point are you like we're going to talk you through it when you need to hire your own internal recruiter versus using agencies where they're going to be? How are you going to pay them? How are you going to build culture? What create, like, what kind of company do you want to build based on the people that you hire? Because if you don't have that at the core of your values, if you're at the core of who you are, then you're just building shit and selling shit. Right?
Speaker 2:I mean like you're not building a company that has staying power, that has purpose, Because you know what people want purpose. People want to go to work for a place that has purpose. That purpose is built by the executives and the leaders in the company that care deeply about their people, both internally and externally.
Speaker 1:Well, I think, too, there's a bit of a disconnect A lot of times with C-level executives or VCs. They hear this concept of a people-first culture and they think of, like all of these culture activities that they have a hard time directly correlating or they have a hard time seeing the causal relationship between those initiatives and North Star metrics, and so this stuff is not like, no, we're focused on these metrics, but what a people-first culture at the core really means is that people are the core and people-first initiatives can make a huge, significant difference. For instance, the concept of employee lifetime value, the parallel to customer lifetime value. If you can look at a sales team ramp and you're able to cut it from six to three months to optimize onboarding, you're going to increase their quota. They're going to deliver more revenue. You're going to have more top-line growth. That's going to compound year over year, which is going to significantly impact evaluation.
Speaker 1:That is a people Function. Onboarding that's not revenue, that's not product. There is a people first culture has a direct impact If you know where to look and you know what projects to work on. There's a huge impact on the success of the organization and I think it's like a lot of execs they don't think of it that way.
Speaker 2:They're like oh, they don't have time to work on this culture stuff Totally totally, but it also, I think the hard part is people don't know what are all the things that need to exist in a people first culture bucket. So some of those things need to be like well, how do we develop people from within the organization to promote them up? What is our strategy for that? What is our strategy for performance plans, and are we really gonna follow through with them, or are they just gonna be there for to say that we can check the box? Do we really believe that we can use them to turn people around? What is our benefit strategy?
Speaker 2:That's a difficult one, right, because it's like are you gonna have benefits that support all or support none or support some? Do you want flexibility in that? Benefits are those weird things that right now, a lot of us really care about. It's so like all of these things like fit into this people first culture bucket, but I don't know. Honestly, I don't know. I haven't seen it. If you've seen it anybody else has seen it send it to me, but show me the list of all the things that you think need to exist in there. That an early stage CEO and I'm gonna say early stage because this is something that, literally, if you're at seed stage or definitely, if you're at CEO or series A CEO, you need to. I know all of these and have a plan to work on all of these.
Speaker 1:Yeah, I mean I can help you with that.
Speaker 2:That's the core of it.
Speaker 1:I would say too, like I see it, like what you're saying about a full list, but I think it's like finding what are the highest leverage wins, things that you can implement, and so for me, like what I'm looking at I mean, I've worked with over 150 startups in the past eight years right, so like this is a standard motion, like I think that the one thing is let's start with town acquisition, because that's like the beginning of the journey. You need to have a structured hiring process For those tuning in. If you haven't listened to the episode of Daniel Chait, go back and listen to it. You need to have that in place. Just like we look at the level of sophistication we see in revenue organizations and sales teams and, for whatever reason, we don't see the translation often- yeah, totally Right.
Speaker 2:So it's like you need to Everything from interview to onboarding, like how are we gonna nurture them if they're just sending out an offer letter and but you know, how do you keep them in check if they've got six weeks before they start?
Speaker 1:There's so many things I mean just like how do you make sure you're hiring the right person through like structured interviews, scorecards? Custom questions Like you know you would never show up to like a discovery call with a customer and like not know what you're gonna do on that damn call Like. And then on interviews you see like five people repeating the same interview. I mean that's just like one example.
Speaker 1:But you need to tighten up that. I mean the one thing I would just say on the town acquisition tide if you do one thing, it's just like tighten up that process really well. The other thing I would say is like, from a compensation perspective, target being in the 75th percentile in compensation yeah, seriously like on the dollar, because if you're in the middle.
Speaker 1:It's not compelling. But here's the thing you never try to be top of market because there's always gonna be somebody who's willing to spend money irresponsibly and get to the top. So you never try to be the top. Better, 75% holistic package sprinkle in like the mission, particularly for early stage. That's how you do it On the people side. Once you onboard, guess what the second thing is onboard optimization maximize employee lifetime value. Get people ramped faster, have them turn into value creators quicker. I think that, like structured hiring and onboarding is. If you're a founder CEO early stage, if you get those two things right, there is compounding growth that's just waiting to be had. That'll increase your valuation and so I would say do those two things.
Speaker 2:But I mean, look, I mean you could even expand that. One thing that is often misguided or forgotten about is but, by the way, your talent acquisition strategy starts with your website. Well, arguably, it starts with your strategy and like who are you, what's your purpose, what do you stand for, what's your mission, mission, values, all that stuff. And then it's like have a damn website that is meaningful, have a process that's meaningful, like because that's the first way in which people are gonna, if we don't know who you are, after an early stage company, and you know, if someone reaches out to James, he reaches out to me and he's like hey, I've got this company for you. What's the first thing we're gonna do? I'm gonna go straight to the website. You're like who are they, what do you do? And so that's like your first, your first opportunity to interact with your talent.
Speaker 1:Oh, my God, you know it's so funny. So, like a couple of years ago, we went through like this big rebrand and we redid the website and I don't know why. But I guess, like just when I had less experience, I was like, ah, it's just a website who gives a shit, and so I didn't like invest significant. And then I got this like great graphic designer who updated our brand and the caliber of talent we were able to hire actually like immediately starting to increase. I was like, damn, like we're getting better Customers, were getting better People. I was like, and you know what? We didn't even spend that like I don't know if I should tell you with this, but like our designer, like we, straight up, we didn't spend that much money. It was like five to two and we had everything we need.
Speaker 2:You just have to show that you care, yeah, just you know, half the time you don't even have anything about like who you are, what you stand for. You know what kind of culture is that exists in there. What's to be expected if I were to come work there? Is it like? Is this an always on culture where it's like I literally work seven days a week? Or is this a like? No, we actually truly believe in work-life balance. Yeah, you know, but look, of course we also believe in you know high IQ and high EQ. Right, we believe in, you know, kind of we believe in like core principles and these are core principles and this is what we operate around. It's like it's just being really thoughtful about that and saying like, okay, this is the way in which we're gonna tell everybody, like who we are and why you should care and why you should join us. Not just like look at our growth and look at the market we're serving and look at our great product.
Speaker 1:It's like okay, I don't wanna get you so far.
Speaker 1:I think it's like and this is just the formula for founders tuning in, because I think some of them have a hard time figuring out how to position their company to candidates and really do it in a convincing way. So the way that, like you do it, just the four, it's a formula and it's simple. So you just say, okay, what is the future that you believe in, right? So that's the first step. And then you have to discuss you know, where is the industry today, what is the future you believe in and why is the founding team well positioned, the founding team and the product well positioned to thrive in that future? Like, if you can just hit those three points, you can build on that and talk about values and beliefs, and that's great, that's color to it. But fundamentally it's just where's the industry today, right? What's the future you believe in and why is your team well positioned to thrive in that future? And that goes a long way. It's a really good foundation.
Speaker 1:It's a good foundation to be and you've got like as you said more color, like you have to talk about, like there's more stuff to do, but I think if, like a lot of founders, could just skip that little part right.
Speaker 2:Yeah, yeah, yeah, totally. By the way, don't forget to talk about who your investors are. You know, everyone just puts like, literally everyone just puts like, oh, their investors logo on there, but guess what? It's the partners in those firms that really matter. It's just firms and what those firms believe in and why there's alignment, like those things matter even in an IC. It's like you know, if you're, if anybody out there is looking to go talk to another company or talk to a company right now they're on market you gotta make sure that you're really clear about who their investors are.
Speaker 1:Right, I agree Because the investors direct the CEO.
Speaker 2:You know the investors on the board. They direct the CEO. Ceo listens, ceo has to go. Has to go execute.
Speaker 1:And by the way.
Speaker 2:as investors, the only thing we can do is hire and fire the CEO. Right, right, that's it.
Speaker 1:We can tell you to go.
Speaker 2:Hey, you don't know if you have the right sales there in place and you might want to get rid of them, but we can't go. Do that. You have to go. Do that, it's your call Right.
Speaker 1:Yeah, I think that that's a huge point. I mean, if you can like. I think one thing that early stage founders also miss is the concept of like. The burden of legitimacy falls on the founding team. What I mean by that is that a lot of founders might come from Netflix or Google or big tech environment and they're used to an environment that is just constantly attracting amazing people and they, I think to some extent. They of course understand it's different recruiting for early stage company, but they underestimate the difference and there's a lot of things you have to do to prove legitimacy. It's talking about your investors. It's having a clearly defined interview process, a clearly defined benefits package, a clearly defined 30, 60, 90 day plan. Candidates are going to be so dialed into that stuff because they're uncertain about how young you are as a company, so you really got to have that stuff together to see my confidence.
Speaker 2:It's very true, it is indeed.
Speaker 1:For this topic everyone, when we're talking about positioning the mission and what I was referring to is a three-step process. On another podcast I used to host called Scale by Design, the first episode with Jacob Garlich, partner in VC, is the one who taught me a lot of those things. If you're interested, go back and watch that episode on Scale by Design and you'll hear more of that topic.
Speaker 2:You got access to all of these. Hey, go listen to this one. Go listen to this one. I got you, we've got coverage everywhere.
Speaker 1:Hey, man, I've been doing these shows now for over a year. Like I said, man, the guest list your peers that are coming on the show. We got CPO of Stack Overflow coming on, cpo of DocuSign coming on, daniel Chase coming back on and a lot of other incredible guests. We're getting to the point now where we're able to basically point people toward episodes that cover specific topics. It's not a whole lot there's, of course, more nuance we can cover but it's fundamentally a lot of the fundamental topics to achieving success hiring, retaining growth, like. We have some content for that, which is pretty cool at this point.
Speaker 2:Hey, let's say so. If we're going to talk about hiring a talent, I want to share some advice on go-to-market hiring. Yes, at least it's go-to-market hiring. If you've got CEOs listening to this right now, I will tell you, because we invest in series A, we do get involved in some series B and I've got some advice for you all. And it's counterintuitive Speed stage. Your focus needs to be hiring customer success and ahead of customer success, bsms and ahead of customer success, maybe support, but your CSMs can cover a lot of grounds. Here's why Our expectation at series A is you get up to a million in revenue and you, the founder, sold all those deals to get to a million in revenue. You didn't go out and hire a head of sales and some AEs. You went out and closed business yourself. Why? Because it's your damn company. You should understand who your target customers are, who your buyer or personas, what the value you deliver. You need to build those relationships. It's so critical. You need customer success to make sure all those early deals that you're landing and closing are wildly successful. Wildly successful they get implemented right, they get utilization right, they get value and you're getting feedback from them directly to you. Super important.
Speaker 2:Second hire after CS you're going to go make is someone in marketing. What? Not sales? Yet You're going to hire somebody in marketing. Why? Because you need to start to think about your branding, your positioning, your competitive intel, your pricing and packaging, all of these things you need to do to help you build some level of awareness and maybe trigger off some level of interest, ie some level of inbound, if possible.
Speaker 2:Because the truth is is when you finally go out and hire salespeople, they need to know that there's some pipeline there. You go to hire full stack AEs and they don't really want to be full stack for very long. The truth is, you're going to hire some junior people as full stack AEs and you're going to be like oh, here's a list of target customers we're going after and you're going to be kind of shooting in the dark. They're going to be your SDR, bdr and AE Closer, etc. And they're expensive. But if you can go hire a junior marketing person maybe they're focused on content, maybe they've got a product marketing background then you're going to get some material insight that can generate some level of awareness. I mean, hopefully you've got some, because maybe you've raised a significant feed round or what have you You've got some momentum for the target that you're going after, a target customer base you're going after. Once you start to build that marketing machine, then you can start to hire some AEs.
Speaker 2:If you're getting a bunch of inbound because your marketing is actually working, that's okay. Hire an SDR, hire two. But don't ever think like I've got all this inbound, like I got to go hire this whole huge sales team. That's an illusion. Number one I can hire an SDR and get through all your inbound in a month Done. We can filter through it all and through that pick out all the little nuggets of gold that we want to go target and tackle. That's great. You don't need to go hire a whole bunch of SDRs. Also, you don't want to go hire expensive AEs to go do that.
Speaker 2:The other thing is you got to remember outbound is tough. It's really tough If you're having to do outbound as an AE who wants to be engaged with customers and closing deals. Everybody hates outbound. It's why it's a process that's a stage in our growth. But if you've got some marketing covers and it makes outbound easier, likely will lead to some inbound. By the way, you're going to comp everybody on the go-to-market side CS marketing and sales based on two numbers top-line revenue and net dollar retention. That's it Not about leads about. We can focus on conversion rates, but all that leads to closed business and happy customers.
Speaker 2:The thinking about your hiring strategy is backwards BS first and marketing and sales. But if you really think about it, if you go out and hire AEs and you go out and hire ahead of sales, you're spending a lot of money in areas where you're still fishing. It's not super efficient. The cost of sales can be really high.
Speaker 1:I agree with that.
Speaker 2:It's going to make it harder. When you go to raise your series A and we're looking at your efficiency numbers and your metrics, you're like why are you spending so much money? What's going on? We went on to hire all these salespeople.
Speaker 1:That's the strategy that we're using. That's secure vision. We customer success, marketing sales in that order.
Speaker 2:But it's still wild though, but we had to do it. We're bootstrapped. I didn't have money to spend on a big sales team.
Speaker 2:That's the thing. Look, if you're a product or engineering founder, if you come from that world, it feels super counterintuitive. She's like wait a minute, I need salespeople, I need salespeople, I need salespeople. No, you go sell. You go read Pikazanji's book called Founding Sales. You know there's just like just learn how to go sell so that you know what it's like and you'll have way more empathy for your good market team and good market leaders.
Speaker 1:It's just like really helpful to actually have a defined process before plugging in people into that process, like let's see what's, before we go out and hire a bunch of people. Let's not figure out what works with a bunch of people on payroll. Let's figure that out first.
Speaker 2:Well, in, look, in the beginning, you've got a whole bunch of hypotheses like we're investing, we've got a whole list of what you have to believe in order for this thing to be an iconic company. And guess what? As a CEO, you've got a bunch of what you have to believe. So when you hire a customer's success, we're going to help you validate some of those beliefs or those hypotheses. Because they're talking to your customers. They're getting them implemented. They realize like, oh, there's this security issue, that we have a compliance issue here that we haven't addressed. That you're going to. We got to now reprioritize in the product, otherwise this whole market segment that we're going after can't convert. Like, didn't know that right. And a lot of people think, oh, I did all these customer interviews when I was building out the product. It's like, yeah, customer interviews when you're building out the product is very different when you're going to implement the product Just totally different.
Speaker 1:That's really good point.
Speaker 2:Hey, that's my two cents for unbid a market.
Speaker 1:I love it, Doug, I mean so. Any any parting thoughts? You've already provided so much value. We got another minute or two here. Anything else that you would mention to executive student again?
Speaker 2:Um, I mean, I might my my here, yes, two thoughts. One just remember you're hiring for the short term, not the long term, meaning the hires that you're making right now, whatever in whatever function that you're making, just think about them being around for the next two years. Don't think about them being around for the next five, six, 10 years, Because reality is that's pretty unlikely. We just see it over and over again and that's okay, Because what you want to hire for is now, Now, on the next year. I'm not hiring for like three, four years from now, when everything's back in frothy again. So just be really mindful of that and it's okay.
Speaker 2:So that's why you want to kind of anchor on on, you know, the right hire right now for that function. And you know, I just say like, just be really thoughtful about the process, Because, as a candidate, there's nothing worse than getting really excited about a product or a company that you've heard about and you just have a terrible process, you have a terrible experience. That actually starts my relationship with you and you're likely starting off on a bad foot. So just really, really, really mindful about that process and and arguably I would say, treat everybody with white, with a white glove.
Speaker 1:I really great advice and Doug. This has been a really fun episode. I know a lot of folks tuning in are going to be dropping this into their Slack channel, sharing it with their team, Hopefully sharing it on social media. So I appreciate you coming on today Of course Great, it's fun topic. Yeah, it was a lot of, a lot of fun, a lot of fun. Well, hey everyone, thank you so much for tuning in and we'll talk to you next time, take care.