VC Backed Companies
VC backed companies, particularly those dead men walking in DevOps and browser testing, use the Sales Monkey Model. It is a model forced on them by early VC money where the cost of sales exceeds 60% and fails 90% of the time.
What is a sales monkey in the enterprise software space?
Sales monkeys represent a well-known “sales model” that focuses on hiring reps, throwing them into the market, keeping the few who succeed, firing those who do not, destroying founder and early employee shareholder equity in the process.
He or she is someone who mindlessly sends scores of emails all day with “value props” to prospects one prays may take a face to face meeting. Sales monkeys are measured by brain dead sales managers on how many phone calls they make, how many emails they send, how many face-to-face meetings they get.
These “metrics driven” sales managers can measure activity, not value, not creativity, not imagination.
Sales monkeys spend more time in forecasting calls than in front of decision makers.
They are not measured by how they think, they are measured by how much they spam.
They are “assigned” lists of accounts which change year to year, often quarter to quarter. They are given mindless scripts of “differentiators” they are expected to pitch to anyone who will listen.
VC backed companies are managed by the revolving door of CEOs, VPs of Sales and Marketing from brain dead companies like Chef, Puppet, DevOps Everything and Testing 1,2,3. These are the people who cannot sell themselves to a market but seem to be able to sell themselves to VCs looking for that “exit.”
Nationally, fewer than 15% make sales quota in a single year and fewer than 5% make quota 2 years in a row.
The Sales Monkey Model is ascending because there is a mad dash to a liquidity event required by venture backed companies. Thus, forget expenses, paid for in founder dilution, and blow out top line revenue hoping someone will buy the company before the expenses and dilution collapse it.
This means, you, the valued engineer, are getting screwed out of your option value because the model never works so it requires multiple financing rounds so the CEO and VP have income. Get out now! This is a career-impacting experience.
Venture heavy boards often take the position that if only 15% of the sales force is making quota, the solution is more reps. Of course! Two times failure equals success.
The liquidity event must be achieved at all costs. And the costs are dear. Or one could say they are dear if one misses the event window or the market changes, as it did recently for the unicorn sector.
The focus on the liquidity event comes because the investment company knows it will invest in 10 firms and only one or two will pay back the investment losses in the others. Start pumping steroids into the sales force because top line growth equals success and success gets the liquidity event and that event gets the golden ring.
Except when it doesn’t.
Over the last couple of years, the industry “unicorns” have taken valuation haircuts from 50% to 70%. Many of these companies pumped the sales steroids into their monkeys, accepted the massive turnover, had to do endless financing rounds to the point where their valuation collapsed.
We now learn that these DevOps and testing companies, who are 10 years old or more, never having made a profit are essentially dead. They cannot get the investment for a break out trajectory. They have enough revenue to just survive.
They now focus on hiring “in-house recruiters” because none of the hot headhunters will even take their call. These “in-house recruiters” focus on balloons, parties, games and other sleight of hand events to cover death with some sort of life looking activity.
If you are an engineer at one of these companies, you need to parachute out NOW!
The market’s short term institutional memory kicked in and the good sales reps learned what a toxic place these places were to work, managers counting your emails not measuring the length of pipelines.
Good reps bailed, and less talented sales monkeys lined up at the door—knowing they had a nice gig for 6 to 12 months while they found a real job.
Dilution set in. Every round, 40% or more equity disappeared into funding more sales monkeydom with its 40% or more turnover.
If there were a rush to a liquidity event at the beginning, it grew to a panic after the last round.
So hiring sales monkey armies does get top line revenue growing and if a firm can get a fast liquidity event before the costs eat it alive, the model works.
Then, so too does a Ponzi scheme if you can get out early.
But hiring sales monkey armies starts a cancer.
That cancer is the inherent dilution cost of constant turnover. Turnover means new reps need to be hired. Headhunters must be paid, if you can find them. Startup costs for every rep mean months of non-productive time while he or she learns the territory and product.
Good reps leave and tell peers to stay away. Weak reps need massive marketing infrastructures because they cannot operate without constant leads flowing from automated marketing machines.
20% top line growth is just not enough. Nor is 30%. The only solution is the liquidity event that happens early. If it doesn’t the cancer catches up and gets you.
Smart founders with disruptive companies are bypassing early private equity (dilution) and getting their first customers the old fashioned way.
They are selling their way to revenue. They are hiring “sales partners” who forego base salaries for lots of equity—and they leverage that risk reward equation.
What a thought!
If you are a technical talent in the DevOps, testing or related space, and if your company is over 5 years old and not making a profit and 30% growth, you need to really get a grip and get the heck out.
This is what happens when a company takes in early VC money. The CEO and VPs get big bucks, the HR types pump out the BS, and the engineers get totally screwed.
VC backed companies continue to run the same plays every time.