Enterprise Software: The tough transition from founder led sales to a scalable, professional sales team August 27, 2012Posted by Bernard Lunn in Enterprise Sales, Enterprise Web 2.0.
Tags: business, enterprise-it, sales co, software ventures, technology
You need three reference accounts to be a credible vendor:
Once means nothing
Twice is coincidence
Three times is a trend
These first three deals are very, very tough. Customers don’t want to take the risk of being an early customer of a startup. The only person who can close these first three deals is a founder. That is why successful enterprise software ventures almost always have a balanced founding team of two. One is a brilliant techie who creates the product. The other is a smart, driven, sales oriented person – the “sales co-founder”. Attempts to hire somebody to make these first three deals happen usually fail. You cannot outsource the job.
These first three deals need to evolve with the product. The two founders, the sales guy and the techie, need to work incredibly closely to make these deals happen. The product does not really exist until these three reference implementations are complete.
Each of these three deals is very tough to pull off. Most customers prefer to wait until the product is proven in the market – they want to wait until you have those three reference accounts. You can be justified in having a big high five celebration on each closing. However the next transition is often even tougher. Mostly it is tougher because founders don’t see this one coming. The first three deals are so tough and so all consuming. There are four temptations when you reach this point, each with their own peril:
1. Just keep working the same way. This is very tempting for the sales co-founder. Why mess with success? You and your techie co-founder are working as a great team. You have a pipeline. You are enjoying this. The propects want to keep working with the founders. There is only one problem. You can never build a big business this way. Maybe you are OK with that, but your window of opportunity can close very fast. Your market wants a winner to emerge. There is a gap that needs filling. That is why you succeeded in getting those first three deals. The market wants your company to become a big viable vendor. So, while they love talking to the co-founders, they love your experience, insight and energy, they also want you to build a scalable organisation. If you don’t, the market will annoint another winner and you will find doors being closed.
2. Hire a professional sales guy to replace the sales co-founder. The founder can make selling the product sound so easy. You have a great product, three happy reference accounts and a window of opportunity into a big new market. Surely you can find somebody to replace you? Sadly, many ventures fail totally at this stage. Those that make it past this phase do so thanks to the drive and will of the founders after burning through many of these professional sales folks in an expensive process that is full of fights and bitterness. Who do you hire for this key role? It is tempting to go for the professional from a big company. The candidates will tell you why they are quite comfortable making the transition to a startup, why that is what they have always wanted to do. Sadly many of them are refugees from big company sales teams simply because they were not good sales people. No matter how many times these professionals deny it, they will expect your company to have all the marketing bells and whistles of a big, mature vendor. They will also quickly get uncomfortable with the constant pivots and tactical flexibility. This is an essential feature of the early days of a startup. The sales co-founder can manage this easily as they are an owner and they have a close working relationship with the technical co-founder. However this is really difficult for the newly-arrived sales professional to pull off. The customers keep asking for the sales co-founder. The technical team won’t make changes based on what the newly-arrived sales professional asks for. The organizational anti-bodies rush to kill this intruder. The founders refuse to accept that their scrappy, agile, fun startup can have these organizational anti-bodies. So the newly-arrived sales professional is fired; it must be their fault. I have seen enterprise software ventures burn through three or more sales professionals in this way. This takes many years, costs a lot of money and often means the company misses the big window of opportunity.
3. Hire an entrepreneur-sales type. Knowing about the perils of bringing in the professional sales type, many founders aim to hire a clone of the sales co-founder. That can sometimes work OK, better than the sales professional from Bigco. But this just postpones the time when the venture has to implement scalable sales processes. The more immediate problem is that most people don’t like being clones. This is particularly true of the entrepreneurial sales types. This route often leads to big clashes between two strong-willed personalities that each deeply prize their freedom to work things their way.
4. Raise a lot of Venture Capital so that you can hire a top notch sales manager (VP of Sales) who then brings the full sales team on board. This addresses one big issue with both routes 2 and 3. It is hard to bring on just one sales person as this makes the role of the sales co-founder unclear. The sales co-founder cannot just manage one sales person. But all you are doing is replacing all the problems of hiring a sales person with the same problems but related to hiring a sales manager. It is very hard to accelerate growth in enterprise software using Venture Capital. Hiring a sales manager who brings on a whole team at this stage may simply accelerate the burn rate.
When you pass the gate labelled “3 reference accounts”, get the whole team together for a big celebration. Your venture is now viable, you are “in business”. Then head off for a couple of quiet days to work out how to pass through the next gate labelled “big valuable company”.