The Exchanges

Q Can I ask what other ways do investors kind of bastardize metrics? You mentioned it there, but the most common that you see, again, I want to be the best investor I can be, Dave, like really teach me. That's why I love my job.

A Yeah. I mean, you've, you, we've stumbled into my favorite example, which is CAC payback period. It's, it's a compound metric that If done on a net new AR basis, it's looking at gross margins. It's looking at sales and marketing efficiency. Uh, it's looking at churn, right? It's looking at everything. So it's a great screening metric. Don't get me wrong, Gary. If I were screening companies, uh, I would, I tend to want to use compound metrics. The more I'm trying to fix broken things, the more I want atomic metrics. The CAC ratio is another one. We hit it, but, but the purest form to me is just how much does it For a dollar of new ARR, you can do it on a gross margin basis. You can do it on a net new ARR basis.

AI assessment note: “we've stumbled into my favorite example, which is CAC payback period.”

Q So if huggers are not useful and the others should be professional services, is there a room for CS in modern SaaS companies?

A Yeah, personally, I think there is. Um, I think, look, if you, if you do, A hundred K, 500 K million dollar deals, and you got big accounts and grow them, then maybe not. Then maybe you can push back to sales, right? Because I, I've worked at companies. When I ran MarkLogic, I had a rep in one account. They're an eighty million dollar company. They have one account, NSA, and their job was to grow NSA, right? When my first sales call at Salesforce, I went to Qualcomm. The rep, one account, Qualcomm. My job is to grow Qualcomm. So, so when you're doing real enterprise, and I don't think if you have one account that you need to see us in. Right. You could do that on your own. So, um, the less you look like that, the more I think you need CS. So, so I think CS should exist. I'm a big believer in CS. I just think it needs to understand that it's a selling role much. I'm going to ask you for money. My job is to get your renewal. So, so I want to talk about that. And if you have tech support question, I'll connect you, right? If you need professional services, I'll connect you.

AI assessment note: “Yeah, personally, I think there is. ... the more I think you need CS.”

Q Can I ask what other ways do investors kind of bastardize metrics? You mentioned it there, but the most common that you see, again, I want to be the best investor I can be, Dave, like really teach me. That's why I love my job.

A Yeah. I mean, you've, you, we've stumbled into my favorite example, which is CAC payback period. It's, it's a compound metric that If done on a net new AR basis, it's looking at gross margins. It's looking at sales and marketing efficiency. Uh, it's looking at churn, right? It's looking at everything. So it's a great screening metric. Don't get me wrong, Gary. If I were screening companies, uh, I would, I tend to want to use compound metrics. The more I'm trying to fix broken things, the more I want atomic metrics. The CAC ratio is another one. We hit it, but, but the purest form to me is just how much does it For a dollar of new ARR, you can do it on a gross margin basis. You can do it on a net new ARR basis.

AI assessment note: “we've stumbled into my favorite example, which is CAC payback period.”

Q Do you think it will, or do you think it'll be baked into existing vendors? You know, we'll outreach.

A Well, that's part of the, I'd include that in market organizing. Yeah, it might be done through M&A. It might be through turning companies into features. There's a lot of ways the market can organize. The thing I know is it's not going to be a hundred different companies with too many names, and we can't understand who does what. Um, but my advice is rather than try to pick winners, I mean, VCs have that problem. Customers can just play with tools, right? And just go get yourself familiar with these things. That's what I advise people. Yeah, try to Pick the tool you think is gonna win, so you don't have to switch later, but, but more important than that, don't, don't sit on the sideline waiting for a winner to emerge before you figure out how this tool can help your business, right? Just go play. Tell your sales ops head, I want 30% of your time playing with new tools. Just go out and try new stuff, right? Because we need to know, we need to understand what these things are and how they can help us, because they can make phenomenal improvements in productivity.

AI assessment note: “It might be done through M&A. It might be through turning companies into features.”

Q like, I can just go in so many different ways with this, uh, the closed plan, uh, I don't hear people talk about that often, Dave, uh, how many of you lost the sales leaders, uh, When should we create a closed plan? Should I, you know, when's the right time? What are the standard steps? Are they standard? And how do you think about good versus bad closed plan?

A So to me, the closed plan is the, in some ways, it's the anti-slip plan, right? It's the list of things we need to know to make sure we can close the deal this month. So it's not strategic. In my mind, it's a list of answers to questions like, what day is the deal going to close? Who's going to close it? What committee needs to approve it? Do they have budget authority? What's the product? Do we understand the process for getting a budget authority? Like, to, to a certain extent, just think of the close point as a list of questions that over time you build every time a deal slips, and that, that you could have known about. Like, by the way, I should give you, to be nice, I'll give you a valid difference. The company got acquired on the last day of the quarter, all purchasing got frozen. Okay! Right? That we couldn't have seen coming, right? But it needs to literally be that level of act of God, right, before It's, uh, before it's an excusable reason for a slip. But, but back to the closed plan, I can go dig one up and share it with you later, but it's just literally all the stuff that can go wrong is your, it's super mechanical.

AI assessment note: “It's the list of things we need to know to make sure we can close”

Q cool recordings. That's one way of, like, reviewing. When we think about, like, sales reviews, how often we're in an early stage company, and when we think about the audience, it's mostly a hundred K aero to ten million aero, because not actually many companies beat the ten million aero. When we think about that as a range, how often should the CEO slash sales leader be doing sales reviews?

A In my world, there's three different types of calls. Let me just define them. I think the There's a forecast call, there's a pipeline scrub, and there's a deal review. Purpose of forecast call is to come up with a forecast. Should be all numbers. One of my sides to fire is sales manager. It's a forecast call. It's all storytelling. Oh, I talked to Joe. Joe talked to Mary. Mary said this. I didn't ask you that. I asked how much you can sell this quarter, right? So that's forecast call. Pipeline scrub is all about scrubbing the four key value seals of an opportunity, value, close date, stage, and forecast category, right? So let's validate those. Validate those are real data. Um, And the deal review is, is it to me a very collaborative exercise where we get as many people who want to come and we say, if you're the rep, Harry, how are we going to help Harry win this deal? Harry, tell us everything about this deal and let's help you win. So, so I don't, when you say sales review, I'm not sure what you mean. If it's one of those three things I can talk, otherwise you got to define it for me.

AI assessment note: “when you say sales review, I'm not sure what you mean.”

Q Does that, does that matter? Okay, I'm just pushing you. Does that matter if your LTV is eight years?

A Well, uh oh, darn, you beat me to it, Harry. Yes, that's going to be the question, which is, what you pay for something should be a function of what it's worth. Right? It's that simple. So, so, so I don't love it. That's why I was trying to pick kind of like egregiously ICAC where it's high enough that at some point in 36 months, I might not actually care what your LTV is. I mean, I do know companies. I just talked to one yesterday that does like 10 year contracts with big insurance companies. Okay. So they might be an exception, right? Because all their customers seem to last 10 years. But the answer is very much what you pay should be a function of what it's worth. And therefore, I can't make a hard and fast rule. I do think somewhere around 24 to 36 months people stop calling you back, so you have a different problem. It doesn't matter how good your story is if you don't get the meaning.

AI assessment note: “somewhere around 24 to 36 months people stop calling you back”

Q If you're a sales rep, how do you prove that people like you, Dave, use and love my product? Customer references? Logos? Name dropping? Oh, well, I was talking to X the other day.

A Look, vertical strategies work, because the people like me effect, they're inherently limited, and they're a little bit high cost, because you now have to learn a lot about all your customers in that industry, but I think all of the above. Name dropping, say, did you know, did you know the company X and company Y uses us, they're leaders of your space, um, demonstrating understanding the use case, like, I would, the, uh, what's it? I said, when hiring meets salary, when they, when they're, when they're completing each other's sentences, right? Uh, no, no, that was Jeremy Barron. Uh, like when you're describing your problem that I can finish your sentence, that, that builds credibility. It's like, whoa, this guy actually understands my problem. He's completing my sentences. Um, and he says, they're using me at the competitors down the street, and the SE just helped implement a system at one of those competitors, right? It's that whole effect of, oh my gosh, people like me, it, it, by the way, you know, a vertical dinner, Right? So you get invited to a dinner and you find literally people like you there. Um, yeah, it's very important.

AI assessment note: “I think all of the above. Name dropping, say, did you know”

Q Do you think we denigrate GTM focused founders?

A I don't actually know. I would say the fashion right now is product oriented founders for sure. I would say product, not engineering, by the way. Uh, that seems to be the best. Like if I was advising a young person where to go, if you wanted to found a company in two or three years, I'd say product, not engineering. Uh, back in the day, it really was engineering because I think product is seen as a, Kind of less intense form of engineering. Like they're technical enough. They understand the product. Like, do you really have to understand exactly how to build a product? So I don't know. I think that's the, that's my perception of the preference of the industry night right now. Cause, cause back in the day, it really was engineering. I mean, it was, they were engineers. They weren't product people because some product people aren't that technical, which creates its own set of problems, right? Cause they're, they're neither fish nor foul. I think GTM founders are revered if they're selling GTM tech. So, so I think that's the case where people want them. Right, because they understand the buyer and the problem. I think the other interesting pattern to look at, and I don't have data here, but my sense is, if and when you replace a founder, which was extremely unpopular for the last five years, but I think will get more popular going forward, you will tend to replace them with a GTM …

AI assessment note: “I think GTM founders are revered if they're selling GTM tech.”

Q That's so interesting. What can one, why is it important to understand? Because I'm the same as you. I'm incredibly direct. I always think, you know, it's better to be clear and direct up front. Can you unpack the importance of understanding power just so I understand it?

A I think for me, Harry, it, it was cause I'm something of an idealist. I always thought that kind of being right would win in the end. Like if you had the best argument, you would win always. And by the way, I'm a pretty good arguer and I won a lot, but, but it's not always the case, right? Sometimes you, you need to, and this by the way is West, but most of my career in marketing, not sales, right? The first time I had a quota, I was a CEO, right? I had to know a lot about sales. We'll talk about, spent a lot of time supporting them, but let's be clear. I come at it from the marketing perspective. Now, I think the difference between a salesperson and a marketing person is I tended to be more theoretical. What is correct? What is right? Whereas a seller is reading the room very closely. Who cares about what? Who has what interests? So, so I had some famous board conflicts. I mean, Bernard probably should have fired me at least four times at business objects. I would have fired me in hindsight. So, so yeah.

AI assessment note: “I always thought that kind of being right would win in the end.”

Q cool recordings. That's one way of, like, reviewing. When we think about, like, sales reviews, how often we're in an early stage company, and when we think about the audience, it's mostly a hundred K aero to ten million aero, because not actually many companies beat the ten million aero. When we think about that as a range, how often should the CEO slash sales leader be doing sales reviews?

A In my world, there's three different types of calls. Let me just define them. I think the There's a forecast call, there's a pipeline scrub, and there's a deal review. Purpose of forecast call is to come up with a forecast. Should be all numbers. One of my sides to fire is sales manager. It's a forecast call. It's all storytelling. Oh, I talked to Joe. Joe talked to Mary. Mary said this. I didn't ask you that. I asked how much you can sell this quarter, right? So that's forecast call. Pipeline scrub is all about scrubbing the four key value seals of an opportunity, value, close date, stage, and forecast category, right? So let's validate those. Validate those are real data. Um, And the deal review is, is it to me a very collaborative exercise where we get as many people who want to come and we say, if you're the rep, Harry, how are we going to help Harry win this deal? Harry, tell us everything about this deal and let's help you win. So, so I don't, when you say sales review, I'm not sure what you mean. If it's one of those three things I can talk, otherwise you got to define it for me.

AI assessment note: “when you say sales review, I'm not sure what you mean.”

Q and often they have the heads of sales there, and we say, well, why did we miss numbers? And they go, ah, you know, the Jones account, the Jones account, it just slipped into next quarter, next quarter, it slipped, uh, and I'm kind of left there going, Okay. What do I say to that? Like, what's a good reason to let an account slip into next quarter versus not?

A I think there are almost two types of companies. Those were slip as an acceptable thing and those that aren't because some level, I mean, let me just be a jerk for a minute. Okay. Wait a minute. You don't make the software. So your only job is to sell the software. You're not a technical resource. You don't help customers deploy. So this is kind of the, you had one job argument, right? Like you had one job. Um, and it's like, let's just remember, that's what you do in sales. So I'm not super sympathetic to slipping, right? And as part of your one job, you're supposed to tell me how much you're going to sell and when. And so, so I start with a pretty hard position. Um, let me just go in order. That's the first thing, which is my philosophy is not, oh, slips happen, you know, oh, inevitable. No, it's your job is for not to be having this conversation. So I'm immediately unhappy. But the next question is how much slipped into this quarter? Because people love to be asymmetric. They love to say, oh, yeah, we made the quarter, except for this deal that slipped out. They're like, well, that's funny, because two million slipped in that should have been made last quarter. So if we're gonna do this slipping game, let's do it in a symmetric manner, because I've noticed your tendency is to only want to kind of artificially pull things in, like count the first week of next quarter, you kno…

AI assessment note: “let me give an example of an invalid excuse and a valid excuse.”

Q as launch day comes, they broaden the ICP in fear that they're not going to get anyone use that product. And so they go, ah, we're not just actually for For product managers now with anyone who needs a to-do list, uh, or whatever that is. In terms of, like, the biggest product marketing mistakes that founders and early product people make, what are they that you see most often?

A So there's a lot in that question. I want to tell you a story first. You may have to re-ask it and edit that out, but I can tell you a story first. So I worked at an object database company, Harry, and object databases was a grim space back in the day. It was, it was right after the relational database. Everybody thought they'd be the second coming. So there was a whole generation of companies raised about a hundred billion in aggregate, which was a lot of money at the time. Everyone tried to sell this stuff horizontally and I joined, I'm running product marketing and it doesn't work. Nobody wants to buy them because they're just learning how to adopt relational databases. So one day I come to work, and we literally fire the entire executive team, um, and I get my first VP of marketing job, hey, hey, battlefield promotion, um, to VP of marketing, and they bring in a new CEO, and we say, you know what, let's focus on what's working. Let's double down on what's working. And he said, Dave, Larry, you go, you guys go figure out what's working. So me and Larry went off, and we came back, and we said, well, you know, we're only a five million dollar company, so there's not a lot working here, but we think telecommunications, network management, and this new standard Is, is working. He says, great. Let's bet everything on that. All chips on telecom network management. And we grew that…

AI assessment note: “So there's a lot in that question. I want to tell you a story first.”

Q That's so interesting. What can one, why is it important to understand? Because I'm the same as you. I'm incredibly direct. I always think, you know, it's better to be clear and direct up front. Can you unpack the importance of understanding power just so I understand it?

A I think for me, Harry, it, it was cause I'm something of an idealist. I always thought that kind of being right would win in the end. Like if you had the best argument, you would win always. And by the way, I'm a pretty good arguer and I won a lot, but, but it's not always the case, right? Sometimes you, you need to, and this by the way is West, but most of my career in marketing, not sales, right? The first time I had a quota, I was a CEO, right? I had to know a lot about sales. We'll talk about, spent a lot of time supporting them, but let's be clear. I come at it from the marketing perspective. Now, I think the difference between a salesperson and a marketing person is I tended to be more theoretical. What is correct? What is right? Whereas a seller is reading the room very closely. Who cares about what? Who has what interests? So, so I had some famous board conflicts. I mean, Bernard probably should have fired me at least four times at business objects. I would have fired me in hindsight. So, so yeah.

AI assessment note: “I always thought that kind of being right would win in the end.”