The Wisdom Wall

“The biggest thing I've learned about working with PE is I thought they were fixer upper people... And I don't actually think many of them like to do that. They want it fixed first.”

“a lot of times founders think it's not possible and give that company to a PE person. And I guarantee you they're going to have 20% EBITDA, maybe 30% EBITDA in a couple of years. It can be done.”

“Another friend of mine has this expression from Machiavelli that warring princes means one thing, a weak king. And if you're CEO of the company, you cannot allow warring princes in your company. Everybody sees it. The whole company knows if two E staffers are at war.”

“avoid this fake either or framing, which is you need to speak like you're vision driven. So when you're talking to customers and analysts, the markets, talk about the desired end state. Talk about the vision. Don't talk about competition. When you're building your company culture, my opinion, make it customer driven.…”

“First, you did not have on a quarterly basis in an enterprise company, 80% of your reps every quarter. You might have had 80% every year. You might, right? 80% at a hundred percent of quota on an annual basis is very good. On a quarterly basis, it's almost impossible in enterprise because it tends to be backloaded.”

“I've worked with many startups where the figure it out sales VP had to leave when we hit ten million. And I always feel bad about that, because I don't actually think they have to leave. I think they should be redeployed. Like, my answer is, what do you do with them? Go find something else to figure out.”

“Create your own agency or your own services org. Charge for it. Charge market rates. Maybe even a little more than market rates. Uh, actually, not maybe. Charge more than market rates, and then build a partner network.”

“Now to me, the best practice here is that marketing should be the quarterback of the pipeline, because if you think about those four funnels, the only person they all report to is the CEO. So either you're going to be the quarterback of the pipeline, or you're going to delegate it to somebody who doesn't run all four.…”

“there's a semi-famous quote that, uh, but cash is a fact, profit is an opinion. Uh, I feel the same way about ARR and churn, that ARR is a fact, uh, churn, And churn rates are an opinion.”

“So it's not a valuation driver. I now think of it as a, as a financing enabler, right? Okay. So a higher one isn't necessarily by itself going to drive a higher valuation, but I could tell you if you don't have a high enough one, you're not going to be able to raise money.”

“if you're in some horizontal platform category, people may throw hundreds of millions, maybe even billions, of VC at the category. And you don't get to not play. So, if you find yourself in this situation, it's probably a sign that you're in a really good category, but you either need to play to win, and go out raise…”

“If I'm not keeping the board busy, Helping me drive the company, they are going to come in with ideas and ways to help that I may not find helpful.”

“avoid this fake either or framing, which is you need to speak like you're vision driven. So when you're talking to customers and analysts, the markets, talk about the desired end state. Talk about the vision. Don't talk about competition. When you're building your company culture, my opinion, make it customer driven.…”

“By the way, for whatever it's worth, I don't actually think customer success should report to sales. I think that's a stress reaction to save money. I think the company hits a downturn. There's too much sales expense, which customer success is usually classified as sales expense. The CRO goes, I'll take it over. I'll…”

“unless your business plan is predicated on price model disruption, do what everybody else does.”

“There's two ways to solve that problem. One is to have super consistent pricing, which in my experience in enterprise is very difficult. The other is to have very complicated pricing. So it's very hard for them to figure out who got the better deal.”

“Because the VCs tend to be trusting and say, what's your CAC and tell me how you calculate it. And isn't that interesting? Whereas the PE people just said to say, give me all your data. I'll tell you what your CAC is fundamentally. Especially in the context of an acquisition or a fundraising. I don't really trust your…”

“So, if you find yourself in this situation, it's probably a sign that you're in a really good category, but you either need to play to win, and go out raise the other guy, or you need to find pivot into some sub-segment where you're not directly competing with them.”

“And this notion of having a sell by date, it may not be polite, but often board members have it, and if they have it, I'd advise you to understand what they are. And to try and reframe the issue that it shouldn't be that John or Mary is with the company or not by the sell by date, it's in that role.”

“The last three I just exclude is politics, period. Because what you're saying is you want your function to be more important than the other function. So I throw those out.”

“Their OTE, their on-target earnings, is 300 K. They're gonna cost a 180 K for two-thirds, and you can adjust these numbers to your local market, but do the exercise, right? So I'm hiring a seller. I'm hiring two-thirds of an SC. I'm hiring two-thirds of an SDR to work with them, a sixth of a sales manager, and probably…”

“Scaling is very different. It's about a small number of amazing process and infrastructure oriented leaders leveraging a large number of great, but not necessarily amazing people, right? They're not solving problems. They're building systems and processes. Quality is about process, not individual excellence.”

“Anyone with an idea is trying to help, and your job is to listen, to understand the idea, and then by and large not do it, right? Because if you have a good plan and a good strategy, you need to go execute that.”

“Americans always inflate their resumes, and Europeans are pretty modest by comparison, and that's a terrible intersection, right, because you have someone who's kind of modest interviewing someone who they think is modest, and that person has created this resume that makes them, one founder literally said to me, these…”

“Don't hire a VP of sales, hire a director. And let them try and earn the job.”

“If you go that route, then you got to be careful because if it gets too big, people are going to say, you're not a software anymore. You're not a software company, Nick. You're a services company pretending to be a software company, right? So you have to be very careful. It doesn't get bigger than around 20 or 30% of…”

“So, in my opinion, the founder experience that happens a lot is you found a product company, and one day you wake up and you're running a distribution company, and you go, what happened?”

“the fact of the matter is, if you're talking to your buyer, and it's a high consideration purchase, they will have time to read a twelve-page white paper. They will have time to go to a one-hour demo, right?”

“I think the number one mistake I've seen founders make is they hold people's feet to the fire on all those cells, and I think that's wrong. I think it's demotivating. I think it, it, It doesn't reflect an understanding of the fact that the model deviates from reality. People don't like it. So I think as CEO, you should…”

“There's nobody who's a five-five. God doesn't make them, right? You, you either grew up in product marketing, or you grew up in demand generation, right? You also don't get 20 pointers. I think 15 is the maximum number of points you can get on this scale.”

“So to me, controllable versus uncontrollable churn, it is a concept people talk a lot about. But, but I get super uncomfortable because I think it could easily be a cop out, right? You know what? Like my last company, they got a new CFO and they didn't renew. We can blame the new CFO, but if a new CFO asked the head of…”

“to a certain extent, I'd also stop doing multi-year deals, because if you're giving someone a price lock for a multi-year deal and they're not renewing, you, you gave something and got nothing.”

“And one of the things VCs do is pattern match, and if you don't channel their energy, you are likely to be pattern matched to death.”

“The last three I just exclude is politics, period. Because what you're saying is you want your function to be more important than the other function.”

“the most common form of misleading is what I call cherry picking, right? You just don't put up the bad numbers, right? You put up different numbers every quarter.”

“And when I give the forecast to the board, I want to give a 90% confidence interval. So I'm giving them the lower bound of a 90% confidence interval. Now people hate that. And if people get scared when you use those words, I have advice. Just say you get to miss it once every two and a half years. That's what it means,…”

“I have one of my MBA is recalculate everything. And I'm like, this is a symptom of a very serious problem, right? We don't trust the management team to present the correct numbers. We don't correct them to do the trust them to do the right formulas.”

“If, if the top two important numbers are not being achieved and you can't see why in all the other numbers, I can't diagnose what the problem is, but I can tell you, you have a problem and it does happen from time to time.”

“The symptom is very simple. You go to a board meeting or QBR or management meeting, and the only two people who ever asked numbers, answer numbers questions are the CFO and the head of rev ops.”

“That's going to drive your CAC up because CAC is a function of growth rate in enterprise software because you're carrying unproductive slash ramping resources, right?”

“I actually think the best way to segment them is by aspiration. That, that if we could, and nobody offers these yet, but I want you to just consider this, this concept that we should segment benchmarks by aspiration, which is if I want to sell for 18 times EBITDA in three years, boy, wouldn't it be nice if I could…”

“even layer one, layer one has taken me with certain companies I work with quarters. And I walk in every time I have this kind of entrepreneurial blind spot going, this is going to be easy. Me, head of FP&A, CFO, we'll get this nailed in 30 days, 60 days. Every time I do that, and most of the time, three quarters later,…”

“They produce a nature-based PNL, not a function-based PNL, and you can't do SAS metrics off a nature-based PNL.”

“Templates build trust. Why? Because there's no cherry picking, and the most common form of misleading is cherry picking.”

“If you step back and take a more kind of macro view on it, you, you should try to raise money about every two years.”

“You know, one interesting thing about this phenomenon is you can often take the size of somebody's round and divide it by eight to 10 and get a pretty good approximation of their burn rate.”

“the perverse thing about this is, the better your category, the more likely that is to happen. If you're selling some very Focused vertical SaaS app, you're unlikely to find a spending arms race, right? But if you're in some horizontal platform category, people may throw hundreds of millions, maybe even billions, of VC…”

“That's how you lose interest in meeting with a direct report, and I view the non-desire to meet with one as a huge warning sign that you should inspect.”

“And one of the things VCs do is pattern match, and if you don't channel their energy, you are likely to be pattern matched to death.”

“The number one cause of CEO death is misalignment with the board.”

“And the people who got you from zero to 10 are almost by definition figure it outers, right? If a scale it upper joined your company at zero million dollars, they probably quit pretty quickly.”

“Investors get diversification by investing in 20 of you. You don't have to be diversified, right? Diversification is their problem, not your problem.”

“The way to avoid it is three things. One, Well, really two things. Hire and empower strong architects. Too few companies have an independent architect, not the VP of engineering, who keeps an eye on technical debt and the architecture. Critical role to have on your team. The second is do a trust release every four to…”

“the U.S. has geography and vertical industry, right, they're correlated. Like, if you're focused on pharma, you go to New Jersey, finance New York City, entertainment LA, and sometimes for a company, I actually recommend, even if you don't have to be vertically focused, be vertically focused anyway, because it will…”

“if I bundle in free services into my subscription, I suck the air out of the room for the partners, right? Who's going to want to work with me? Because you give it away for free.”

“You don't want to raise money from a VC who wants you to be a billion dollars, and you want to sell it a hundred million. I've had friends who wanted to sell it a hundred million. VCs wouldn't let them, right? Um, because they'll say, no, we're, we're blocking the sale because we have that right, because we're not here…”

“If the category hasn't formed yet, you're probably in a why-buy-one mode. Hey, I know there's this thing you never heard of. Let me tell you why you should buy one. If there is a category, and there's five vendors in it, and there's a magic quadrant, you're probably in a why buy mine mode, right? And the buyer is…”

“People want references who remind them of themselves. So, this is a large part of the whole Crossing the Chasm book, is you can't take a, you know, technology pioneer and reference them against a pragmatist. It doesn't work.”

“alliances, which can easily account for 10 to 30% of your pipeline, usually that closes faster and with a higher rate”

“The way to solve that is two things. One, quarterly win-loss analysis at your QBR, right, hire a third-party firm, To analyze wins and losses, to bring reality back into the room, and second, this is done far less often, but I think even more important, a win-touch analysis. Take three to four deals you closed last…”

“They teach journalists in journalism school that for any story it's about five W plus two H, right? Who, what, where, when, why are the five W's? How and how much are the two H's? I add a Third H for how different, because in tech, differentiation matters so much. Like, so it's not just enough to have the five W plus…”

“And I like messaging to be black and white, particularly when we're on offense, we want to be black and white. Only we have this. When we're on defense, we want gray. Right? Well, you have consolidation. Well, they have consolidation. You don't. Well, actually, we just introduced a consolidation module last week. It's…”

“So this is the key to building simple, memorable messaging. I still, I launched Business Objects version six in 1996. I still remember the messaging. P-D-E. Why? Because it's in a ternary tree, right? So I firmly, firmly recommend using ternary trees to structure complex messages.”

“net dollar retention, which I think is actually a more effective way to get at what churn is trying to measure.”

“In fact, if you only had two numbers to give you the value of a SAS company, it would be ending ARR and growth rate. I could then tell you roughly what that company is worth kind of a first order valuation.”

“To me when it's less than 20%, maybe you're not exploiting your expansion opportunity much, as much as you should be. When it's over 40%, uh, maybe you're not getting as much new logo as you should be, right? So, so I personally like it running in the twenties and thirties.”

“VCs in general kind of like all-in-one metrics because they're trying to make an investment decision. I always feel like operators don't love these metrics as much because if it's too high, I don't know which side of it is broken, right? If my CAC payback period is too long, is it because my CAC is too high or my…”

“A good rate is around a 115%.”

“some people are good at different phases of the company. That, that's a reality we must deal with, and just because someone was a right member of the team last year, doesn't mean they're a right member of the team next year.”

“First, you're working for a committee, not a person, and second, if you ever went to that committee going, gosh, I wonder what we should do next quarter, right? They would look at you and say, I think you should help us find a new CEO, right? Because you're supposed to know what we're supposed to do next quarter,…”

“we need to separate kind of vision, which is kind of an end state goal for the company, from strategy, which is kind of a systematic path to get there.”

“all other things being equal in a financing round, you can have somebody who's very nice and very smart from a no-name firm, or, or somebody who is equivalent from a big-name firm, your future fundraising will be much easier if you pick the second person.”

“If you step back and take a more kind of macro view on it, you should try to raise money about every two years.”

“one interesting thing about this phenomenon is you can often take the size of somebody's round and divide it by eight to 10 and get a pretty good approximation of their burn rate.”

“That's how you lose interest in meeting with a direct report, and I view the non-desire to meet with one as a huge warning sign that you should expect.”

“And if you're CEO of the company, you cannot allow warring princes in your company. Everybody sees it. The whole company knows if two E staffers are at war.”

“What the board wants is for you to be a little bit uncomfortable with your team. The board wants you to be challenged by your team, right? The board wants you to hire people, quote unquote, better than you, or more experienced than you. Why? Because by and large, if you're on the e-staff of a startup, that's not the…”

“the more financial, i.e. less operational they are, the more they care about two things, numbers and people.”

“if you're getting the board slides out 24 hours or less before the board meeting, you're not looking good, almost regardless.”

“The number one cause of CEO death is misalignment with the board.”

“That the companies I work with that kind of have their metrics act together, Don't have the deja vu problem because the numbers are telling us what's not working.”

“the goal is to not have conversation about metrics, but conversations about the business using metrics.”

“To me, the definition of that should be customer verifiable, right? With one phone call, I should be able to verify that, and that one's easy. I just call the customer and say, do you think our product can solve your problem? Because that's what solution fit confirmed means, right? And if they say no, it's not stage…”

“You can and should use market research to understand this funnel. You can't find this funnel in your CRM. It's not there. Right, because it's a lot of people who never made it to you. All the people who never heard of you, all the people who never considered you, won't be there.”

“I think every CEO should have a driver-based model where you play with sales productivity, sales turnover, sales ramp time, marketing is a percent of sales, cost per sale. You put these various drivers in and you can see what happens to your business, see their impact.”