Startup Sales Has Changed
VC-backed software and SaaS firms often attract the low level transaction sales VP who manages pipelines rather than leads an energetic, thriving sales force. These sales VPs apply sales monkey tactics which work for several quarters, then fail miserably. The world of startup sales has fundamentally changed.
This is why these VPs are the 5th, 6th, 7th in the 10 year old SaaS firm’s life. Having never made a profit, always scrounging for enough VC money to last another 2 years, these firms hire transaction level sales VPs who always fail and their companies typically do as well.
You see this in overwhelming display in the DevOps sector—Chef, Puppet, XebiaLabs, recently deceased Perfecto Mobile, browser testing companies, and scores of others.
That is why such firms have more “former sales VPs” than profitable sales quarters. Startup sales is very different.
If sales VP number 6 couldn’t make a profit, why will sales VP 7?
If sales VP 4, 5, 6 could not make a break out, why will number 7?
Well a transaction sales VP has low level DNA about moving deals into this quarter, no matter the cost. Not because it is smart, but is all they can be measured on.
And that cost is often dear. They will take a $500,000/year (5-7 year life) SaaS deal that is sure to close in Q3 and force it into Q2 with a 20% discount. That is a loss to the company of at least $500,000 over 5 years.
Try that with a half dozen deals every quarter and watch your revenue struggle. And watch your sales turnover.
Accelerating deals via SaaS discounts is like multiple bottles of Red Bull at one sitting. Everything feels great for a quarter or two, then those pipelines dry up and the hangover is terrible. One cannot sleep.
The customer now has a 20% lower cost for any recurring sales, because discounts are forever. The sales rep has 20% less commission because the sales VP cares more about the quarter than the employee. The sales engineer, same thing.
This is sales monkey madness. It works for 2 or three quarters, then the bottom falls out, always from lack of pipeline or sales turnover or both.
Startup Sales Is Different Now
There is a constant with transactional sales VPs. They do not understand the difference between moving a deal through a sales process and developing a pipeline. In fact, they know typically nothing about how to develop a pipeline. Or better said, what they do know is palpably wrong. That is why they are number 4, 5, 6 or 7. They all got it wrong–because they were all transactional sales monkeys. Times have changed and transactional mindsets are, well, yesterday.
The skills one needs for long term, healthy pipeline development and transactional sales are antithetical. Running a rigorous sales process with QBRs, weekly forecasting meetings, end-of-quarter discounts is a pretty well washed out way to sell. And it is entirely obsolete.
The customers have been trained to expect this nonsense so one wonders who is managing the sales cycle, the customer or the hapless sales VP.
The process always, literally always in my experience, does have one successful outcome. A new sales VP, when he or she comes on board, always has several great consecutive quarters. That is because they sell the heck of the pipeline that others built. It is usually 2 good quarters, sometimes 3. Then, Sahara Desert time.
Because they focus on closing deals to show their not-so-bright CEO how good they are, they are 90 day heroes. Then Q3 or Q4 and ouch! This happens so often that those of us who have been CEOs recognize it every time.
There is no such thing as one bad quarter in a SaaS company. And if it is bad because of pipeline development, expect this to continue on and on. There may be one bunched up good quarter, but the pipe will always be dry the next quarter out.
That is because the processes and skills one needs to build healthy pipelines is 100% the opposite of running a sales monkey quarter-to-quarter business where the sales VP forces healthy deals from the next quarter into unhealthy deals in the present one.
If the firm is trying to raise money, this is like economic cancer — on one’s face. The company cannot hide the fact that they just cannot make the sales regularly — with growth. While there are all kinds of excuses, pipelines need 4 -12 months to develop. And if a sales VP is not transactional, they know how to always develop pipelines 12 months out, not 90 days out.
Developing a pipeline is probably the singular talent a modern sales professional needs, if one were to choose only one talent for success.
Any sales monkey can run a sales process.
Look at the DevOps companies like Chef, Puppet, the recently dead Perfecto, and the DevOps testing companies and you can see this in action. And the result, as our pals at Perfecto just showed us, is equity collapse for the employee option holders.
Developing a pipeline is not a sales monkey function.
That said, the sales monkeys and their equivalent marketing monkeys think that MARKETO-SPAMMING companies with endless emails, holding worthless “webinars” and clothing the command-prompt masses with logo-wear at trade shows is developing a pipeline.
Look at those lists for that recent webinar. 500 people registered. 150 showed up and listened. And 87% of them registered with their Hotmail, Gmail or other anonymous email so you the “pipeline building spammer” would not get their company email address.
Really want to call those “leads?”
Only a modern Marketo-Spam driven marketing department calls a lead a web attendance from someone hiding their name so you cannot contact their company.
And when these “leads” go to the transaction sales VP, he or she is all over the great pipeline being built because they came from the sales monkey ranks who think SPAM generates value. It may have done so 5-7 years ago. But as Graham Hawkins (Sales Tribe, go there)
notes in his outstanding book, we are in a mature market and none of this stuff works any more. For startup sales, it should be your Bible.
What does a mature market mean?
Well, it means that the customer has seen it all. They know what a DBMS is, they know what virtual machines do, they know how security should perform. So they do not want to talk to a sales rep. The more transactional the product, the more this is so.
But the transactional sales monkey VP has no other plays to run. So they double down. If 10 reps are in the field and 2 are making quota (usually from existing accounts or unrepeatable blue birds) hiring 5 more reps must be the revenue enhancing answer.
It is like these people never took a critical thinking or logic course in their life.
Unfortunately, the sales monkey VP came from the ranks where he or she never saw another way to develop pipeline so to this hammer, all of life needs to be a nail. And the nail is transaction sales monkey selling because they know no other way to do it. They are not sales professionals, they are Salesforce.com junkies who can tell you how many average days in a transaction sales cycle but have no clue on how to bring 5 more Fortune 250 firms to the fold in the next year — per rep.
These sales monkey sales VPs have no idea how to engage trusted advisors to gain new Fortune 250 accounts whose revenue can grow the company and make up for the former accounts whose growth will eventually wane. Their idea of a strategic partnership is to have a Business Dev person, always one with great hair, sign up a “partner.” Invariably, these partners never do anything but send out a press release. Again, the difference between true pipeline building and the nonsense of partner announcement activity which generates nothing.
Show them a potentially large, long term opportunity 3 quarters out and they do not believe for a minute it can be real. If it cannot close in a quarter, it cannot be real.
I was with one of these transaction VPs on a call at a major retailer in Plano, Texas. 30 minutes into a one hour meeting, the SVP hosting the meeting asked the sales VP if he were the tech rep. When he said “no, I am the Chief Revenue Officer” there was a bit of a stunned silence.
“Chief Revenue Officer” from a former tech rep who could not shed his sales monkey identity should have said it all. The discomfort was palpable. But the uncomfortable silence kind of said it all — somehow things did not fit.
And they don’t. Upcoming bad quarters then result, and it goes on and on.
This is the only sure thing the CEO can look forward to with confidence — bad quarter after bad quarter now that the sales steroids of forward discounting have sucked out the future pipeline for that one or two early quarter hits.
Let’s not pick on the transaction sales VP. It is not his or her fault. Likely they came from a Chef, Puppet, DevOps testing company X, and they are number 4, 5, 6 so they are part of a large herd. They all do it. They are defined by short term transactions that can never be cobbled together into long term, sustainable growth.
The problem is with the VCs who fund these companies. The VCs start off with hope, then, particularly in the DevOps and testing space, when they see a Perfecto Mobile sell for scrap, they abandon all hope as Dante might say.
All they want to see is quarter to quarter growth so they can dump this mistake. And those first few quarters, they see it. Being not well informed, they do not see the discounting of the future pipeline as the way growth is achieved.
Then comes the dry spell. And another, and then excuses, then another sales VP and…….
You get it.
If you have a company with disruptive benefits, stay away from VCs because they make you do stupid stuff fast.
That is most evident in the sales VPs they hire, who virtually always fail.
VC money brings sales monkeys. And sales monkeys fail. And those who work for them, get screwed on equity.