Nov 22, 2024 · 1h 22m · news
Dan Fougere, CRO @Datadog: Why Discounting is Dangerous and Contract Sizes are Misleading | E1229 · 20VC with Harry Stebbings
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In this deep-dive interview, former Datadog CRO Dan Fougere shares a masterclass on building elite enterprise sales organizations, explaining structured deal qualification, PLG-to-enterprise scaling, strategic recruiting, and the personal realities of hyper-growth leadership.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 13% of the talking time here. How this is scored →
Harry as informed peer 3.3 Guest teaching 4.6 Guest disagreement 1.7 Harry pushing back 2.9
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 55:52 Rejection of Discounting as a Pressure Reliever
Dan forcefully rejects Harry's suggestion of using discounting to ease pressure on sales teams during downturns, insisting that discounting must be strictly controlled at the CRO level to protect unit price and long-term valuation.
Hardest push from Harry ▶ 12:54 Challenging Granular Qualification ConsequencesHarry directly challenges Dan's strict qualification methodology, arguing that reps taking a granular, cynical approach will end up with an empty pipeline and face leadership backlash.
Biggest teaching moment ▶ 38:11 Reframing the Pre-Product CRO RequirementDan educates Harry on why proven CRO candidates would never join a pre-revenue startup with zero growth, reframing Chad Peetz's thesis and explaining why founders must handle initial sales before hiring senior leadership.
Harry holds his own ▶ 17:42 Pitting Guest Against Peer Sales Leader FrameworkHarry demonstrates deep domain familiarity by bringing up Chris Degnan's strict weekly meeting threshold to test Dan's views on sales team management and meeting quality versus quantity.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Transitioning from Engineering to Sales | 2 | 4 | 1 | 1 | Harry introduces Dan's background in mechanical engineering and asks how to build a qualification machine. Dan explains the origin of MEDDPICC at PTC and the mindset needed to qualify deals effectively. | |
| Earning Your Way Up the Enterprise Ladder | 2 | 5 | 1 | 2 | Harry asks how sales teams can build relationships with executive buyers without alienating technical champions. Dan contrasts Datadog's bottom-up practitioner approach with Medallia's top-down C-suite selling strategy. | |
| Generating Urgency and 'Magical Moments' in Sales | 4 | 5 | 1 | 4 | Harry questions how urgency can be created when software purchases can easily be delayed to the next quarter. Dan reframes urgency around creating magical moments in sales and shares how a $600 deal expanded into Datadog's first $1.4M enterprise deal at Capital One. | |
| Outbound Prospecting and Differentiating with Value | 4 | 5 | 2 | 5 | Harry pushes back on strict qualification rules, arguing that cynical reps will end up with empty pipelines. Dan explains that differentiation comes from research-backed outbound prospecting that delivers upfront value rather than generic sales pitches. | |
| Why Account Executives Must Own Pipeline Generation | 3 | 5 | 2 | 3 | Harry asks whether outbound prospecting still works in 2024 and if AEs should own pipeline generation. Dan argues that asking others to generate pipeline for an AE is like asking someone else to go to the gym for you. | |
| Quality vs. Quantity in Sales Meetings | 4 | 4 | 2 | 4 | Harry pits Dan against Chris Degnan's belief that doing more than eight meetings a week hurts sales quality. Dan agrees on quality over quantity but clarifies that he managed reps strictly on adding new qualified opportunities rather than total raw meeting counts. | |
| Scaling Small PLG Accounts into Enterprise Giants | 3 | 5 | 1 | 2 | Harry asks how sales leaders prevent reps from ignoring small PLG contracts when chasing large annual quotas. Dan outlines the leap of faith needed during Datadog's early transition to land small accounts that would scale with cloud adoption. | |
| Storytelling and Avoiding 'Show Up and Throw Up' Demos | 3 | 5 | 1 | 2 | Harry asks for lessons on delivering sales demos and common rep mistakes. Dan emphasizes pre-demo discovery and narrative storytelling, warning against 'show up and throw up' feature dumping. | |
| Uncovering Personal Drivers and Getting Offline | 4 | 4 | 2 | 2 | Harry brings up David Schneider's three corporate motivations for software purchases. Dan acknowledges corporate drivers but stresses that closing deals requires uncovering personal motivations and building offline relationships outside Zoom. | |
| Redefining Customer Success in Sales Organizations | 4 | 5 | 3 | 4 | Harry presents Chris Degnan's provocative take that Customer Success belongs 'in the trash'. Dan counters by sharing Datadog's unique non-commissioned four-month handoff model and explains how CS structure depends on company stage and product complexity. | |
| Structuring CS Compensation and Adapting to Legacy Buyers | 3 | 5 | 1 | 2 | Harry inquires how Customer Success compensation should be structured. Dan details how CS needs differ between cloud-native startups and legacy enterprise buyers requiring heavy technical implementation support. | |
| Creating a Repeatable Sales Playbook for Onboarding | 2 | 5 | 1 | 1 | Harry asks Dan to define what a repeatable sales playbook entails. Dan breaks down a structured, step-by-step playbook covering onboarding cold calls, discovery frameworks, demo outcomes, and exit criteria. | |
| Why Sales Leaders, Not Founders, Must Build the Playbook | 5 | 5 | 3 | 5 | Harry challenges Dan by citing Chad Peetz's thesis that CROs must be hired pre-product and Jason Lemkin's view on repeat CROs. Dan firmly disagrees, explaining that top-tier CROs will not join zero-revenue startups and that sales leaders, not founders, must build the enterprise playbook. | |
| Wealth, Humble Beginnings, and Reality Distortion | 3 | 4 | 1 | 3 | Harry bluntly asks Dan about coming from humble beginnings and how achieving immense wealth impacted his perspective. Dan candidly shares his transition from defaulting on credit cards to earning $67M from Datadog, describing how sudden wealth can distort reality. | |
| Does Wealth Equal Happiness in Hyper-Growth? | 3 | 4 | 1 | 3 | Harry asks if immense wealth creates happiness and presses on personal stress during hyper-growth. Dan recounts paying household bills with a home equity loan while serving as a senior executive at Medallia due to lack of secondary liquidity. | |
| Transitioning from PLG to Up-Market Enterprise Sales | 3 | 5 | 1 | 2 | Harry asks when PLG founders should layer on an enterprise sales organization. Dan uses a marathon hydration analogy to urge founders to build enterprise sales capabilities before immediate necessity forces them to. | |
| Defining and Driving a High-Performance Sales Culture | 3 | 4 | 2 | 4 | Harry asks how to build a world-class sales culture. Dan shares his bold day-one speech at Datadog projecting a landmark IPO, and Harry presses whether that speech was genuine conviction or self-inflation. | |
| Performance Improvement Plans and Fire Fast Philosophies | 3 | 4 | 2 | 3 | Harry asserts that placing an employee on a Performance Improvement Plan signals the end of their tenure. Dan agrees that most do not recover but emphasizes the need for documented processes and leader accountability before termination. | |
| Keeping Sales Team Morale High During Downturns | 4 | 5 | 4 | 4 | Harry brings up discounting as a potential mechanism to alleviate sales pressure in downturns. Dan forcefully shuts down discounting, arguing that loose discounting destroys long-term unit economics and company valuation. | |
| Credibility in Logo Validation and Testimonials | 3 | 4 | 3 | 3 | Harry questions whether brand logo validation actually influences prospective buyers or if purchases happen in isolation. Dan confirms logos provide initial credibility, but firmly rejects discounting contracts to secure customer testimonials. | |
| Identifying Candidate Discipline and startup Tenure | 3 | 4 | 1 | 2 | Harry asks how to screen for discipline and spot job-hopping candidates. Dan describes assessing candidate trajectory through math background, fitness habits, and tenure through startup vesting cycles. | |
| Utilizing Sales Demo Tests in the Hiring Process | 4 | 5 | 2 | 3 | Harry asks about sales demo tests in hiring, then delves into Dan's setback at Medallia when he was passed over for the CRO role. Dan candidly shares navigating secondary stock sales and how David Achiria orchestrated his move to Datadog. | |
| Quick Fire Round: Sales Leadership and AI | 3 | 4 | 1 | 2 | In the quick fire round, Dan discusses changing his mind on junior reps handling large deals, how AI enhances prospecting efficiency, advice for new sales leaders, and names Sean Walters as his top CRO recommendation. |
Statements from this episode (35)
Fougere promises sales team life-changing wealth and career success
“We will have a legendary sales team making life-changing money, being best in class, and having fun. You will learn more and become better at your job working on my team than you would have at any other team during that same amount of time. And you will never …”
Fougere: The MEDDIC sales methodology was invented at PTC
“So this qualification methodology medic that everybody uses, it was invented there while I was there.”
Fougere: Deal qualification requires actively searching for flaws to overcome optimism
“You have to realize that human nature is such that you want to have the rose-colored glasses on, you want to believe the deal is good, and you need to know that the opposite is probably true. And you've got to look for the dirt and you've got to build that int…”
Fougere: True economic buyers are one or two levels higher than expected
“What I know from experience is it's probably one or two levels above whatever you think it is, whoever you think it is.”
Fougere: Top enterprise CIOs rejected Datadog's cloud monitoring pitch in 2017
“Amit and I went on a series of dinners with Shardul Shah in early 2017, and we were, and it was all CIOs. And CTOs. And we were so excited and we went to fancy restaurants and nobody cared about cloud monitoring.”
Fougere: In early 2017, enterprises had almost no cloud production applications
“And so the enterprise, there were really, in early 2017, this might be surprising to some people, is there really weren't any production applications in the cloud for the enterprise.”
Fougere: Datadog's first enterprise deal was $1.4M with Capital One
“And all of a sudden that was our first enterprise deal, and it was for 1.4 million dollars, and we had never had a deal like that before, and that was about six months in.”
Fougere: Sales reps should excite prospects before attempting early qualification
“They're trying to qualify in the beginning and you need to light them up with like excitement. You need to get them on the hook by getting them as excited about what you have as you are.”
Fougere: Pipeline generation cannot be outsourced to SDRs
“Asking somebody else to do PG for you is like asking them to go to the gym for you. I think it creates, I don't think it creates the right culture to think that this is something that can be outsourced. And so the way I look at it is PG is everybody's job.”
Fougere: High pipeline volume matters more than high close rate
“And if you don't have enough pipeline and you have a really high close rate, you're not going to hit your number. But if you have a ton of pipeline, and even if you have a lower close rate, you're going to hit your number.”
Fougere: One weekly pipeline opportunity and meeting guarantees reps hit quota
“Like at Datadog, when I left, it was one of each of those, a pipeline, a new pipeline opportunity that's got a specific definition and a new business meeting for enterprise and two for SMB. And if I had those, I could, I guarantee you, you're going to make you…”
Fougere: Personal buyer motivations drive enterprise sales, not corporate metrics
“Dave is talking there truthfully about like more probably corporate motivations. And so, and those are important, but they're also abstracted away from the motivations of the people you're actually selling to. And so Both of those are important. The ones that …”
Fougere: Datadog gave reps four months post-landing before CS account handoff
“Gave them when they broke into a new account, whether it was inbound or outbound, doesn't matter. They had four months to sell more products, to take advantage of some of the growth that they might have because of a consumption model. And then after that point…”
Fougere: Datadog reduced CAC via non-commissioned Customer Success growth
“And so the CAC was incredible because the growth was non-commissioned because CS did not have commission, right?”
Fougere: Datadog differentiated enterprise CS support from commercial sales CS
“So for enterprise CS, it was more about kind of like Implementation and support for commercial CS. It was kind of like a sales kind of cap capacity.”
Fougere: New hires cold-called and booked meetings during onboarding training
“When we were doing new hire training, my last two companies, when I was running all that in the new hire training, we would get outbound meetings. Like your first days, we are cold calling.”
Fougere: Founders cannot scale sales playbooks to billions in revenue
“And that's a great way to get started, but you're not going to scale to billions of dollars of revenue, at least in my experience with that. Like you're going to need more of what I just described and every place I've ever been, that's been the sales leader do…”
Fougere: Sudden extreme wealth distorts financial perspective temporarily like a black hole
“What I've found is afterwards, you kind of like, you're decaying sinusoid gets back to steady state, and now it's like, okay, I'm back to reality, but during that period of time, it's like a black hole.”
Fougere: Paid household bills with a HELOC four years into Medallia
“Four years in, I had been eating into my savings and I ended up paying a bill with a HELOC check.”
Fougere: Chief Revenue Officers typically receive around 1% equity
“Generally speaking, a CRO is going to have like one percent, you know, so something like that.”
Fougere: PLG founders wait too long to build enterprise sales capabilities
“If there's that voice in your head or that feeling in your stomach where you're like I wish I had a better salesperson right now. I wish I could break into the enterprise. I wish I could go up market. I wish I could do three year contracts instead of month to …”
Fougere: Datadog struggled to recruit sales talent due to engineering bias
“When I went to Datadog, people didn't want to go there. Like recruiting was so hard. And part of it was a reputation that it was a, it was an engineering company. They didn't respect salespeople.”
Fougere: Sales leaders should join strong product cultures over sales-first companies
“I can make a great sales culture, but I can't make a great product in engineering culture. And so I'm going to go to a product in engineering culture and I will build a great sales culture because those two things together will be more powerful than, you know,…”
Fougere targeted $120M, $240M ARR, and top IPO at Datadog
“And I also said that we will do a hundred and twenty million dollars next year. And we will do two 40 the year after that. And we will have the most successful IPO in history in New York.”
Fougere: Bad sales leaders yell at scoreboards instead of joining calls
“The leader is not in the boat with them. The leader yells at the scoreboard at the end of the quarter or end of the week. How come you didn't get more meetings? How can we didn't do this? Like, well, you should have been in it with them. It shouldn't be a surp…”
Fougere: Most employees placed on PIPs do not recover
“I have seen some people pull out, but most people do not.”
Fougere: Sales reps with discounting authority always offer the maximum discount
“Without the right leadership, and even sometimes with the right leadership, salespeople left to the left to their own devices will peg at maximum discount, 100% of the time.”
Fougere: Discounting small consumption accounts destroys future pricing leverage
“If you're in a consumption business, if you are going to the lowest discount already, when they have the smallest amount of spend, when they have quadrupled, 10 X to their spend, they're going to expect bigger discounts.”
Fougere: Companies should not discount prices in exchange for testimonials
“I don't think so. I think people, people do it because you're delivering value for them, and because you build relationships with them, and I wouldn't want to trade economics for really like non-economic support.”
Fougere: Leave immediately if an employer misleads you during hiring
“And if we're in the honeymoon phase, and you're already telling me things that are not true, Get out, because it's only going to get worse.”
Fougere: Require sales candidates to pitch your company in interview tests
“Here's, here's where I ended up is that I want them to Do be, sell the company that I'm at now. I want them. I want us to give them a company to sell to, and I want to give them like three days and come back and you be the rep.”
Fougere: Optimal sales candidate test prep time is three hours
“In some ways we found that kind of like the perfect amount of time to spend on it is like three hours because it's enough time to do the job. If people who spend less time, they're not the, their work, their quality of their work output is probably not going t…”
Fougere: Qualtrics caught Medallia because its product innovated faster
“Qualtrics caught up to us because they were out developing us. They're out, their product was innovating much faster than ours.”
Fougere: Junior sales reps can close major deals with proper training
“Over my experience over the past few years that very junior people can do very big deals with the right training and the right leadership. And that is very different than what most salespeople are taught is that only the most senior salespeople can do the big …”
Fougere names Sean Walters as the single best CRO to hire
“Sean Walters. He has been able to take over Datadog. I've, I hired him as a rep at BMC right after we were acquired at Blade Logic by BMC. And he went through some super hard times and came out as the top rep. And got promoted. He was a leader at BMC and came …”