The Exchanges

Q Does the profile vary depending on geography, uh, client type, ACV size?

A Sure, slightly, but I mean, there's just still the core things you're looking for, right? So think about what's the job I'm hiring you to do. It will sell software. Okay, it's more nuanced than that, okay? So not to pick on Oracle, but I'm going to pick on Oracle. A reps at Oracle right now. He's selling software, right? He's selling software. That's what he's going to say, and I'm going to say, okay, are you doing pipeline generation? Yeah. I'm selling our new X product into all these Oracle accounts that have never brought X product. I'm, I'm hunting for new logos. No, you're not. You're going into install based accounts, selling a product into them, probably just convincing them to do a wrap and roll saying, hey, if you buy this product, I'll discount the shit out of your existing license to buy this product from me. Now take that versus you're going to go work for Snowflake, a ten million, that's a ten million dollar ACV company. Nobody gives a shit about a cloud data warehouse. Nobody's ever heard of Snowflake. And I'm going to take that rep and give him 25 accounts and say, go convince those accounts to move all of their data from on-prem to a company called Snowflake they've never heard of. Those are two very different jobs.

AI assessment note: “Sure, slightly, but I mean, there's just still the core things you're looking for”

Q What is the biggest reason why a previously well-performing rep turns into a non-performing rep?

A There's a lot of factors, but some of it is just what, they get tired. Look, it is, I had this, I had this debate with one of our CEOs, um, not long ago, and he said, look, I want my reps, sales reps should love their jobs. They should enjoy their day jobs. And I said, I don't, that's not possible. They can love working for us and they should, they should love their CRO. I respect my CRO. My CRO is invested in me. He's developing me. I'm winning, right? Big thing. I'm winning. You're making me successful. So I may not love every aspect of my day job, but I love working for you for all of those reasons. But do I like getting on the phone and making cold calls three days a week and doing pipeline generation? No, I do not. Having a rep that loves his day job is, is very difficult in our environment because nobody likes doing pipeline generation. It's not fun. It's a grind. And so what can happen over time is reps wear out. And what you'll see after what can happen is, okay, I've been in a startup for three years and I'm worn out. And then what do they do? They don't go to another startup. They go to a big company. I'm worn out. I don't want to do this shit anymore. Comes back to reading resumes. Hey, you were at this startup company and you did really well, and then you went to IBM to use an extreme example. You went to IBM for five years. We're never talking. I'm never recruiting…

AI assessment note: “There's a lot of factors, but some of it is just what, they get tired.”

Q why it's so interesting. You said early that you like the horizontal approach. I love the verticalized approach. I look at notion and I look at air table and I look at all these companies actually question for you. All of them are trying to scale into enterprise with a PLG motion. I think that's really fucking hard getting the world's biggest enterprises to adopt notion. Are you kidding me?

A Totally different motion. It's a totally different motion, and, and the problem, I mean, look, there's a lot of time you can spend on this, but PLG, you've got, I don't know enough about their businesses, but let's just say you've got a low-level developer that's bought your product, and he's using your product because it's PLG, right? So he's put his credit card in, he's using your product, and now I want to go sell To the CTO, right? And I, and I have an enterprise rep. Totally different motion, right? So it's a completely separate sales organization, right? So now I've got an enterprise seller in there. I want to go sell to the CTO. CTO probably does not give a shit that he's got a bunch of engineers using the product. It's a completely different value proposition. A lot of people think if I nail PLG, then I'll nail enterprise. You can nail PLG and enterprise. I just would argue that nailing one does not necessarily make you more likely To nail the other. So if you can do both, do both, but You gotta, in my opinion, you gotta start with direct sales, and then let the product get to where the product needs to get to, and then go to PLG.

AI assessment note: “CTO probably does not give a shit that he's got a bunch of engineers”

Q How scalable is your model? You take very active roles. You often sit on boards, board observers. How scalable is it actually?

A I mean, I'll take this one. It, it, it, up until this point for 30 years, it's been me. Um, so I have a team that handles the recruiting. I handle all the board work, all the consulting work. Um, and, and we're, I think I have seven companies in the portfolio I can't take on anymore. Um, the reason I was so excited to bring Chris on a is because he adds value in so many places that I don't. The reality is operationally. I think I'm pretty good. I've sat on a lot of boards. I was trained by Chris. I was trained by John McMahon. I was trained by Mike Spizer to do the operational ship, but the reality is I've never sat in the seat. I've never been a CRO. Chris is the only CRO in the history of technology to go from zero to four billion. And so I think the two of us combined are pretty special. The reason I brought Chris in is I can't Expand the business without Chris. We're also making some other pretty critical hires or hiring a guy by the name of Mike Haas. It's going to come help scale the, uh, recruiting side of the business and then two other people. So to answer the question right now, it's not scalable. Once we get these additional people in place, it is scalable, but will we ever be a company that's got 30 companies in our portfolio? Never.

AI assessment note: “right now, it's not scalable. Once we get these additional people in place, it is scalable”

Q Is there anything specifically we can do to make sure reps ramp quickly?

A Well, ramp is, remember there's a couple of things that go into ramp. Number one is the sales cycle itself. So to, to define a rep as productive, right? A productive rep, if, if the productivity per rep is a million dollars per year, the first quarter they're productive is the first quarter you can expect them to do two fifties. So first of all, you have to, people get this definition wrong all the time. Like the second a guy does a deal, he's productive, incorrect. It's the first quarter in which they hit their full productivity number. And so if you have a sales cycle, that's six months. How do you get the ramp time less than six months? You can't. So the two things that go into shortening ramp time are the sales cycle itself, and then the enablement of the rep. So there's two things that go into it. You can do a good job of getting the enablement to happen within 90 days, but if your sales cycle is six months, you're still gonna have ramp time of six months.

AI assessment note: “the two things that go into shortening ramp time are the sales cycle itself, and”

Q This was one of my questions, which was like, you know, it's often said that actually it's so hard being a sales leader. No one in their right mind would do it twice. Is that true?

A Early stage? A hundred percent. It's the worst job in software. So we do something unique at Sutter Hill in that we bring in a CRO pre-product, right? Most people don't do that, and I can explain the justification for it, but we really bring people in pre-product. So if you look at like a good friend of mine, Keith Butler at Observe, amazing guy, we brought him into Observe before there was a product. He's been there for five years. Um, companies killing it. He's doing a great job, but he's been there for five years already. And so if, if you, I don't want to put Keith, identify Keith, but if you ask somebody that's gone from ask Chris Degnan, you've gone from zero. Chris is the only guy that's ever gone from zero to three billion. But if you ask somebody that's done that, Hey, would you go back to zero? Absolutely not.

AI assessment note: “Early stage? A hundred percent. It's the worst job in software.”

Q Is there anything specifically we can do to make sure reps ramp quickly?

A Well, ramp is, remember there's a couple of things that go into ramp. Number one is the sales cycle itself. So to, to define a rep as productive, right? A productive rep, if, if the productivity per rep is a million dollars per year, the first quarter they're productive is the first quarter you can expect them to do two fifties. So first of all, you have to, people get this definition wrong all the time. Like the second a guy does a deal, he's productive, incorrect. It's the first quarter in which they hit their full productivity number. And so if you have a sales cycle, that's six months. How do you get the ramp time less than six months? You can't. So the two things that go into shortening ramp time are the sales cycle itself, and then the enablement of the rep. So there's two things that go into it. You can do a good job of getting the enablement to happen within 90 days, but if your sales cycle is six months, you're still gonna have ramp time of six months.

AI assessment note: “the two things that go into shortening ramp time are the sales cycle itself, and then the enablement”

Q When we think about that right type of sales org, what are the biggest ways that companies go wrong in creating that sales org?

A So now we've, we've talked about the CRO, right? So we've talked about what the CRO must be good at, right? Finding You often find product market fit, but, but you got to go deeper than that into some of the things we've just discussed, working with product, capturing data, sharing all that, working collaboratively, et cetera, et cetera. And by the way, you have to have a CEO that supports that, right? Because your CEO might, if the CEO does not support the collaboration between product and sales, you got a problem. Now they operate in silos. And what will happen is the product organization will build what the product organization wants to build. Sales guys are struggling to sell it because it's not what the customers want. Product organization says to the sales organization, you suck. We built the product. You can't sell it. You guys are not good. Sales organization says you built the wrong shit. Now, not only do you have them operating in silos, they don't trust each other. I've seen this and it does not end well, and it's not that uncommon.

AI assessment note: “if the CEO does not support the collaboration between product and sales, you got a problem”

Q Does the profile vary depending on geography, uh, client type, ACV size?

A Sure, slightly, but I mean, there's just still the core things you're looking for, right? So think about what's the job I'm hiring you to do. It will sell software. Okay, it's more nuanced than that, okay? So not to pick on Oracle, but I'm going to pick on Oracle. A reps at Oracle right now. He's selling software, right? He's selling software. That's what he's going to say, and I'm going to say, okay, are you doing pipeline generation? Yeah. I'm selling our new X product into all these Oracle accounts that have never brought X product. I'm, I'm hunting for new logos. No, you're not. You're going into install based accounts, selling a product into them, probably just convincing them to do a wrap and roll saying, hey, if you buy this product, I'll discount the shit out of your existing license to buy this product from me. Now take that versus you're going to go work for Snowflake, a ten million, that's a ten million dollar ACV company. Nobody gives a shit about a cloud data warehouse. Nobody's ever heard of Snowflake. And I'm going to take that rep and give him 25 accounts and say, go convince those accounts to move all of their data from on-prem to a company called Snowflake they've never heard of. Those are two very different jobs.

AI assessment note: “Sure, slightly, but I mean, there's just still the core things you're looking for”

Q Which one do you think founders should focus on more? Everyone talks about NR.

A Look, I don't think one is more important than the other. They just have to look, they measure different things. Gross retention tells me if people like my product, right? Like I understand if my gross retention is 90%, I probably have a pretty good product, right? If my gross retention slips down to 70%, I have a product problem. Net dollar retention is about expanding. So you can have high gross retention and a low NDR. That doesn't necessarily mean you have a product problem. It means you might have a go-to-market problem. You might have a customer success problem. There could be product attributes that contribute to it. And the GRR measures, to me, is really about product. NDR is yes, it's product related, but it also ties in a bunch of other things. So I wouldn't say one is more important than the other. But I will say this, if you have a low gross retention number, by the way, by definition, you're going to have a low net dollar retention number. But if you have a low gross retention problem, you got problems. You can have a high gross retention and a low NDR. And yes, you need to address it, but it doesn't mean you're in deep shit. But if your GRR starts to slip, you got problems.

AI assessment note: “I don't think one is more important than the other.”

Q What is the biggest reason why a previously well-performing rep turns into a non-performing rep?

A There's a lot of factors, but some of it is just what, they get tired. Look, it is, I had this, I had this debate with one of our CEOs, um, not long ago, and he said, look, I want my reps, sales reps should love their jobs. They should enjoy their day jobs. And I said, I don't, that's not possible. They can love working for us and they should, they should love their CRO. I respect my CRO. My CRO is invested in me. He's developing me. I'm winning, right? Big thing. I'm winning. You're making me successful. So I may not love every aspect of my day job, but I love working for you for all of those reasons. But do I like getting on the phone and making cold calls three days a week and doing pipeline generation? No, I do not. Having a rep that loves his day job is, is very difficult in our environment because nobody likes doing pipeline generation. It's not fun. It's a grind. And so what can happen over time is reps wear out. And what you'll see after what can happen is, okay, I've been in a startup for three years and I'm worn out. And then what do they do? They don't go to another startup. They go to a big company. I'm worn out. I don't want to do this shit anymore. Comes back to reading resumes. Hey, you were at this startup company and you did really well, and then you went to IBM to use an extreme example. You went to IBM for five years. We're never talking. I'm never recruiting…

AI assessment note: “some of it is just what, they get tired”

Q Can I ask, how do you do that? Because most people do, like, customer discovery, where they ask the most inane, annoying questions, you know, what are your most prying challenges? And as a customer, you're like, for fuck's sake, this is a crap experience.

A Focus, right? So focus is number one. So all I did was software sales recruiting. So the only people I was calling were software sales reps. So you learn your audience. So if you're a software sales rep, And I study you enough. I know what motivates you. I know why you got into software sales. I know why you're sticking with your job. I know what's going to turn you on about the next job. So when I'm looking at the current company I'm recruiting for, I have to look at the things they have to offer and line those up with what the salesperson is looking for, right? And very few people understand this, right? So you have to know who the person is you're calling. Look at their background. Look at the jobs they've taken to get to where they are and understand, okay, this is what motivated this person. By the way, it's also how you avoid calling. 95% of the people that sell software, I don't recruit salespeople anymore, but 95% of the people that sell software, I'm never calling because I can look at your background and say, okay, I know a lot about you because you made this job at this, you made this change at this point in time. I know what you were looking for, and because you were looking for that, you can't be looking for what I have to offer. I'm not calling you. It's very targeted. So like my, my claim to fame when I was doing sales recruiting was two candidates, one hire ever…

AI assessment note: “Focus, right? So focus is number one... you learn your audience.”

Q Would you have different attribution then according to different companies that you work with, or is it always we're revenue?

A It can be. You got to look at the business, right? Like let's say you look at a business and say, okay, our land motion is really good. We're landing. I'm making these numbers up. We're landing. The average land sales cycle is four months. We're landing at 75, 75 K. Okay. That's a good land motion. I'm happy with that. Now my expand motion Is taking 12 months, and I'm expanding from 75, and I'm getting an expansion of 50. That's not good. The sales cycle for the expand is too long, and the dollar assigned to the expand is not high enough. I can start to pull different levers in the comp plan. So I can say, hey, Mr. Sales Rep, I'm gonna pay you 10% on the land. I'm gonna pay you 12% on the expand. And just by doing that, I'm gonna get a lot more focus on the expand, because I pulled that lever.

AI assessment note: “It can be. You got to look at the business, right?”

Q How do we, I'm a founder that you're advising, how do I combat that?

A I, I, I hope somebody can solve it and tell me, because I, I don't know what it is. Recruiting today is harder, and again, I don't do it, but I manage my guys that do it, so I get all the feedback. Recruiting today is harder than it has ever been for the type of rep that we are looking for. For somebody that's willing to put the work in, that's looking for the development that we offer. A lot of reps today just don't give a shit. They just don't care, which is a concept I simply do not understand. If I'm going to do something, I'm going to go all in and I want to be the best in the world at it. A lot of these people just don't care.

AI assessment note: “I hope somebody can solve it and tell me, because I, I don't know”

Q How quickly do you know when you've made a mishire?

A I mean, like I had somebody not long ago say, look, we hired a rep. It's been three weeks. And I'm like, okay, look, if you're going to make a decision after three weeks, there needs to be an HR issue, um, substance abuse issue. The person is not showing up for work, right? It's got to be super obvious to hire, to fire that quickly. If you're starting to see signs, well, hey, look, you committed to the person. It's your hire. It's your job to make them successful. So if you're seeing worrying signs, fix them. I don't want to give you a, Timeline, right? But when you get to the point of, okay, it's time to change this personnel, it's because you've done everything you know you can do to make the person successful, and they're still not getting there. And you can look at the account list, because there are times when you hire good reps into shitty accounts. So you also have to be honest and say, okay, is this just the patch, or is this the individual? And a good manager knows this stuff, right? So it's the point in time where you say, I've done Everything I can do to make this rep successful. There's no extraneous circumstances which would be causing him or her to fail. It's time to make the move. The other option is you have a rep that's been doing well, and now they're not doing well.

AI assessment note: “I don't want to give you a, Timeline, right? But when you get to the point”

Q How quickly do you know when you've made a mishire?

A I mean, like I had somebody not long ago say, look, we hired a rep. It's been three weeks. And I'm like, okay, look, if you're going to make a decision after three weeks, there needs to be an HR issue, um, substance abuse issue. The person is not showing up for work, right? It's got to be super obvious to hire, to fire that quickly. If you're starting to see signs, well, hey, look, you committed to the person. It's your hire. It's your job to make them successful. So if you're seeing worrying signs, fix them. I don't want to give you a, Timeline, right? But when you get to the point of, okay, it's time to change this personnel, it's because you've done everything you know you can do to make the person successful, and they're still not getting there. And you can look at the account list, because there are times when you hire good reps into shitty accounts. So you also have to be honest and say, okay, is this just the patch, or is this the individual? And a good manager knows this stuff, right? So it's the point in time where you say, I've done Everything I can do to make this rep successful. There's no extraneous circumstances which would be causing him or her to fail. It's time to make the move. The other option is you have a rep that's been doing well, and now they're not doing well.

AI assessment note: “I don't want to give you a, Timeline, right?”

Q How do we, I'm a founder that you're advising, how do I combat that?

A I, I, I hope somebody can solve it and tell me, because I, I don't know what it is. Recruiting today is harder, and again, I don't do it, but I manage my guys that do it, so I get all the feedback. Recruiting today is harder than it has ever been for the type of rep that we are looking for. For somebody that's willing to put the work in, that's looking for the development that we offer. A lot of reps today just don't give a shit. They just don't care, which is a concept I simply do not understand. If I'm going to do something, I'm going to go all in and I want to be the best in the world at it. A lot of these people just don't care.

AI assessment note: “I hope somebody can solve it and tell me, because I, I don't know”

Q You mentioned like, you know how I feel about Europe. I'm not, I'm not kind of deliberately teeing you up, but like if I'm a European founder listening as there are tens of thousands, what do you advise me then?

A I just think it's hard to find the types of people, uh, harder, I should say to find the types of people, particularly outside of the UK in Europe that are willing to put the effort in that I think is required to be successful. I just think it's challenging. And I think it's very difficult to fire people in Europe, as you know, I mean, you want to hire in Germany or France and Spain and decide you want to fire somebody. It's next to impossible. And so having things like performance management and so on and so forth are challenging. Uh, I think Europeans have a different expectation in terms of work life balance. I'm not saying it's wrong. It's just different. Uh, and I think that can make it challenging.

AI assessment note: “I just think it's hard to find the types of people, uh, harder”

Q You mentioned like, you know how I feel about Europe. I'm not, I'm not kind of deliberately teeing you up, but like if I'm a European founder listening as there are tens of thousands, what do you advise me then?

A I just think it's hard to find the types of people, uh, harder, I should say to find the types of people, particularly outside of the UK in Europe that are willing to put the effort in that I think is required to be successful. I just think it's challenging. And I think it's very difficult to fire people in Europe, as you know, I mean, you want to hire in Germany or France and Spain and decide you want to fire somebody. It's next to impossible. And so having things like performance management and so on and so forth are challenging. Uh, I think Europeans have a different expectation in terms of work life balance. I'm not saying it's wrong. It's just different. Uh, and I think that can make it challenging.

AI assessment note: “I just think it's hard to find the types of people”

Q Can I ask, when you look at that speed of execution, now sitting internally, what is it that drives XAI's speed of execution so viscerally differently?

A How many people have done hardware at scale successfully, and at scale is key, successfully, and I, you could say NVIDIA, hardware at scale successfully in the last two decades. You got cars and robots. There is no close competitor to doing hardware at scale than, than Elon. And so, when you can do that, and ultimately this business is, why do you think you see all these trillion dollar deals and this, that, and the other, if these guys are all right, and I don't know, I'm not smart enough to know, But everybody seems to say this is going to come down to compute. You can't compete with these guys. You can't compete with us and compute. And why can't you compete with us and compute? Who knows hardware at scale and is better, is even close to us and hardware at scale? Nobody.

AI assessment note: “There is no close competitor to doing hardware at scale than, than Elon.”

Q Can I ask a blunt question? There's going to be a lot of people who listen and go, well, that's not going to encourage a diverse set of candidates.

A Well, that ecosystem continues to grow, right? And we have a playbook that has expanded and become more and more widely adopted. I'm sure you've heard of medic or med pick and all of the things that we use. So that has become more and more widely adopted, but you're right. If you look at my CROs, our CROs across our portfolio, they all come from that ecosystem. Now, the good news is there continues to be more and more people on their way up in that ecosystem, so you have to look for the next generation. The generation from Blade Logic, which includes some home, like, right, I mean, Dan Fougere from Datadog, Adam Ahrens from Okta, right, I mean, look at all of the different app dynamics, Dolly Rogic, who's a close personal friend of mine, um, you can look at, you know, Chris Degnan that came out of that, like, but the problem is, Most of these guys are now reaching a point where they've made so much money where they may not want to go back and do this again. So you have to look for the next generation.

AI assessment note: “you're right. If you look at my CROs, our CROs across our portfolio”

Q Can I ask, when you look at that speed of execution, now sitting internally, what is it that drives XAI's speed of execution so viscerally differently?

A How many people have done hardware at scale successfully, and at scale is key, successfully, and I, you could say NVIDIA, hardware at scale successfully in the last two decades. You got cars and robots. There is no close competitor to doing hardware at scale than, than Elon. And so, when you can do that, and ultimately this business is, why do you think you see all these trillion dollar deals and this, that, and the other, if these guys are all right, and I don't know, I'm not smart enough to know, But everybody seems to say this is going to come down to compute. You can't compete with these guys. You can't compete with us and compute. And why can't you compete with us and compute? Who knows hardware at scale and is better, is even close to us and hardware at scale? Nobody.

AI assessment note: “There is no close competitor to doing hardware at scale than, than Elon.”

Q to you, I want to unpack the Chris and the snowflake skating, but you mentioned like the focus and knowing the customer so intimately well. Wonderful. But what do you do in a world which isn't verticalized sales when you have a horizontal customer base, which could be in aerospace or it could be in fintech and banking? How do you do that when you have a horizontal customer base?

A It doesn't matter. Like every, every, every company I've ever built horizontal to be clear. I've never built a sales organization focused on a particular vertical, right? And because I don't actually don't think that's a great approach. There's companies that have, that have, that have been successful in doing so, but it's, if you're going to sell, A product that only goes to one vertical, you're, you're seriously limiting the size that the company can be, right? Just think about the TAM. Like, if I'm gonna sell into healthcare, that's all I can sell into. That's, that's, you better crush healthcare, because you have no other alternative. So, every company I've ever been a part of building has been horizontal, right? So, it's not about that. It's, look, what, what motivates a sales rep? What motivates a sales rep that I want to recruit? Most sales rep, I want to make money. No shit. Like, if I get a guy on the phone, what's your number one motivator? I want to make money. No shit. You got into sales. Is that the only thing that motivates you? Because if that's the only thing that motivates you, we're done here. I have nothing, I have nothing to discuss with you. So can we just say, I know you want to make money. I want to be developed. Oh, now I'm onto something, right? I want to be the best software salesperson that I can be, and I want to go work for people that are going to …

AI assessment note: “It's, look, what, what motivates a sales rep?”