Mark Roberge’s Post

Thanks to Harry Stebbings for having me on the 20VC podcast last week. He is an awesome interviewer and nicely unpacked the early days of HubSpot to surface some, hopefully, timeless learnings for today's founders. His points of emphasis include: 1. Be careful about getting pulled upstream too early, especially via an enticing contract that would double revenue BUT create massive revenue concentration in one customer. This potential pothole surfaced in the early days of HubSpot and, fortunately, the ELT denied the contract. The customer would have controlled our product roadmap. It would not have ended well 2. A well-defined Ideal Customer Profile (#ICP) is critical to creating cross-functional alignment (i.e. product/engineering/sales/marketing/CS) and a healthy foundation for a startup. Consider the below 3-category ICP definition framework that we use with our portfolio companies at Stage 2 Capital: 🟢 Green: Strong conviction & good fit. 🟡 Yellow: Not enough conviction, inbounds only. 🔴 Red: Strong conviction to not sell. Update the definition as you experiment and successfully expand TAM. 3. Sales Rep Hiring: Deal Size Experience is More Important Than Domain Experience. While there are a few exceptions, it is often easier to teach an proven big-ACV seller your domain than it is to teach a seller in your domain how to close a big-ACV account. Most founders miss this. 4. Prioritize Coachability in Sales Interview Assessments. No reps start off hitting their productivity goals in month 1. They need to learn the product, the methodology, and the customer. A higher aptitude in coachability increases the probability and decreases the time needed to achieve this goal. 5. Startups Attempt Customer Acquisition via Partnerships Too Early. Founders are intrigued by using a partner channel to drive customer acquisition as a seemingly cheaper, faster, and lower-risk option to hiring a direct sales team. However, these founders underestimate the required two-step process of aligning with the partner exec team strategy and then convincing the partner exec team to motivate their front-line reps to focus on selling your product. It's also very hard to learn through the partner channel and, therefore, best to learn and succeed direct before attempting these relationships. (links in comments) #founder hashtag #funding hashtag #business hashtag #investing hashtag #vc hashtag #venturecapital hashtag #entrepreneur hashtag #startup hashtag #seed hashtag #funding hashtag #sales hashtag #Stage2Capital #HubSpot

The applications for our 3rd annual Stage 2 Capital Catalyst program are due this Friday (7/12). I'm really proud of the curriculum the team has assembled over the past few years. The 12-week curriculum includes: - Recruiting, interviewing, and onboarding your first sales hire - Selecting and executing your first demand generation program (i.e. content marketing, cold outreach, PLG, etc.) - Defining your first pricing model and sales compensation plan - Building your first annual revenue model Each company gets a team of mentors, one for each #GoToMarket module. These mentors will help the startup team customize the learning frameworks to their company context. Over 300 go-to-market leaders have committed their personal capital to the Catalyst Fund and are from the most successful high-growth companies in tech including Datadog, Klaviyo, Zoom, Atlassian, HubSpot, Databricks, Canva, Snowflake, WalkMe, etc. And, of course, each company receives $200K in funding from Stage 2 Capital Catalyst Fund III. More details on the program is shown below. The application is here: https://lnkd.in/ggzmVRA2 Good luck!

Hypothesis: “The sales compensation plan for your first sales hire attracts the wrong person and motivates the wrong behavior.”  On the most recent episode of the #TheScienceOfScaling podcast, I explore this statement with Nick Dellis, VP of Revenue at Mercury, one of the FinTech unicorns in the recent class of growth startups. Using this compensation strategy, he has established strong cultural foundations upon which to instigate scale. I left the conversation with more conviction to lean into best practices on early-stage sales compensation that I teach at Harvard Business School and in the Science of Scaling playbook. Rather than utilizing a traditional sales commission plan for the first sales hires, instead pay them 80% or so of their market OTE and give them an equity stake appropriate for their role and the stage of your startup. Here are the reasons why a traditional sales commission plan is wrong at this stage: (1) It attracts the wrong candidate. A traditional sales compensation plan attracts a coin-operated salesperson, which can yield high-performing sellers but only when the company has the foundation in place to make them successful. The most important value this first hire brings to the company is not necessarily the first wave of customers but, more importantly, a massive influx of feedback generated by dozens of sales conversations each week. To unlock this value, we need an individual who is almost half product manager and half seller. (2) At this stage, we are usually in product-market-fit discovery mode, requiring frequent reflections on feedback from the market and rapid iterations on our product value proposition and ICP. However, sellers on a commission plan are more short-term revenue-focused and will be motivated to sign up any customer rather than instigate necessary product pivots and build a foundation of the right customers. (3) The north star metric for the entire organization at this stage should be the Leading Indicator of Retention (#LIR), not maximizing ARR or ACVs.  The traditional sales commission plan misaligns the seller with this north star, incenting them to sign up any customer for as large an ACV as possible, which could lead to an unrecoverable churn/contraction issue one year later. I do believe a sales commission plan should be implemented during the scale stage, but after PMF is achieved and during the Go-To-Market-Fit phase. But Nick is proving that theory wrong. It's quite an intriguing case study. Have a listen here.  https://lnk.to/TSOS!mr

In B2B software, will #AI be an "iteration" or a "disruption"? The late Clay Christensen’s “Innovators Dilemma” is a useful framework to analyze this question.  The slide below summarizes the innovator’s dilemmas that arguably drove disruption across most B2B categories as we transitioned from On-Prem to Cloud and suggests potential innovator’s dilemmas as we transition from Cloud to AI. This was just one of the topics we presented to our Stage 2 Capital LP base of over 600 C-level executives across B2B tech at MIT's Samberg Center in Boston last week. We also heard from Brian Halligan, co-founder of HubSpot and Stage 2 Capital LP, and three of our portfolio CEOs - Alex Sambvani from Slang.ai, Skylar Talley from MedScout, and Zachary Garippa from Order.co.  We hold this meeting twice a year.  They are probably my favorite professional days.  My learning accelerates and I get to see first hand the software ecosystem progressing and improving, a core tenant of the Stage 2 mission.  Below are four examples of interesting narratives that got me thinking a bit. (1) Red tape from legal and IT in public tech companies may not be the most significant blocker to AI adoption in these organizations.  Instead, it is executive burn out, as teams and leaders are struggling to simply keep the lights on with smaller staffs and big expectations and have no bandwidth for new initiatives.  This trend could accelerate the timeline by which native AI attackers overtake the incumbents in each software category when compared to the same timeline in the On-Prem to Cloud transition. (2) Incumbent services companies are taking the Service-as-a-Software movement seriously.  However, despite their focus, they may not be able to get to the end goal faster than Service-as-a-Software organizations built from the ground up today with an AI-first operational foundation.  (3) Over the last decade, Ops teams have evolved to be a critical driver of success in tech companies.  The Ops algorithms are working behind the scenes to accelerate the performance of frontline human workers.  As AI continues to evolve, we may see this paradigm shift.  We may see the Ops algorithms driving the front-line work and the humans behind the scenes optimizing the algorithms.  (4) The acquisition of proprietary, clean data for AI algorithm training is already on the rise as a separate and critical department within large tech firms and is expected to accelerate across tech orgs.  These teams are better positioned within the Product, rather than the Business Development, teams. Shoutout to all of our LPs! We can’t wait to do it all again on the West Coast this fall.

Some entrepreneurs are overlooking the opportunity to accelerate revenue using a "land-and-expand" go-to-market motion. I discuss this topic on our new episode of #TheScienceOfScaling with Kyle Duffy, Operating Partner at Gradient Ventures, Google's #AI VC arm. We discuss the best practices of a land-and-expand motion for a startup, including: (1) The right sales compensation and pricing strategy are critical to a successful land-and-expand motion. If salespeople are paid primarily on the first contract ARR and very little on the expansion ARR, land-and-expand will not work. Instead, compensate sellers more for the expansion ARR than the opening ACV and implement a pricing model conducive to this behavior. This does not mean sellers need to become CSMs. The sellers simply need to be incentivized to start the customer on a low ACV and sell the product correctly so the expansion comes easy. Most failed expansions are not because of a poor onboarding process but because of suboptimal sales execution. (2) When selecting which use case to target for the "land", consider product features that: (a) Enable low time and effort to retainable value (b) Align with currently perceived versus evangelized customer needs (c) Provide a strategic wedge for further platform adoption (d) Develop high switching costs once implemented (3) Don't round-robin new customers across the CSM team. Instead, organize the AEs and CSMs into customer pods and, whenever possible, send the customers sold by an AE to the same CSM. If you are in the office, sit the AE and CSM together. This strategy encourages more frequent AE-to-CSM communication on customer details and a level of trust between the AE and CSM.  Check out the full episode here: https://lnk.to/TSOS!mr

The new episode of The Science of Scaling Podcast dropped today. In this episode, I speak with Ang McManamon the VP of Sales at Crunchbase. We dissect managing sales through a pivot, specifically how she managed the team as the market transitioned from one of the most bullish markets in tech in 2021 to one of the biggest down markets in tech in 2022. Example discussion points include: How to manage a board that is demanding an unrealistic revenue target? (1) Educate them on the current bottoms-up GTM model by showing them where the team has been performing on the key drivers of revenue outcomes over the past 2 quarters (i.e. the average productivity per rep (PPR), MQLs generated per month, average sales cycle and close rate on sales opportunities, etc.). We implement this framework with our portfolio companies Stage 2 Capital before issues like this even surface in order to establish the narrative from the beginning. (2) Illustrate where these metrics need to be to achieve the revenue outcomes they are demanding. Often this analysis yields the conclusion that the team would need to 2x PPR, MQL generating, and and close rates essentially overnight. Hopefully, they start to see how unrealistic the plan is and that the plan is going to lead to unnecessary burn and departures of top performers (3) Using the bottoms-up model, devise an aggressive but realistic plan that assumes say a 10%-20% Q/Q improvement in each of the performance drivers and the revenue outcomes that this performance would yield. (4) The board may ignore this line of thinking but at least we have educated them on the revenue mechanics and can use that framework to report back results at the next meeting. How to quantitatively assess whether a revenue miss is due to a macro condition, like the economy, or sales execution, like hiring and training the salespeople? An area few boards and leadership teams look at to conduct this diagnosis is the quarter-over-quarter performance of individual AEs, especially the consistent top performers on the team. If the company misses the target and you look under the hood and find that the historic consistent performers are still performing as usual and the miss was driven from AEs hired in the last year, we have a sales leadership execution issue. However, if we look under the hood and see that even the top performers' PPR decreased, perhaps at about the same time and about the same amount, then we have likely have a diagnosis outside of sales execution (i.e. economy, competition, product, etc.) Anyway, Ang is awesome and was completely open about this journey that so many leaders experienced over the past two years. Check out the episode here! https://lnkd.in/e2QiuPEH

We have launched the beta version of chat.stage2.capital. Our goal is to provide an AI companion to founders and early-stage GTM execs for all of their GTM questions using Stage 2 Capital's content as well as 50+ publishers of best-in-class early-stage GTM content. Here are some example prompts: YOU If I am running a B2B SaaS business and am hiring my first salesperson, what are the best interview questions to ask? Stage 2 Chatbot For hiring your first salesperson in a B2B SaaS business, consider asking these questions to gauge their fit and potential: "How do you plan to approach selling our SaaS solution, given its unique value proposition and our current market position?" This question assesses their understanding of your product and their strategic approach to sales. "Can you share an example of a complex deal you closed in the past, including the challenges you faced and how you overcame them?" This helps you understand their problem-solving skills and resilience..... YOU Design a job description for my first revenue operations role. Stage 2 Chatbot Job Title: Revenue Operations Manager Location:[Location/Remote] About Us: At [Company Name], we're on a mission to [briefly describe mission and product/service]. As a leading B2B SaaS company, we're looking for a dynamic Revenue Operations Manager to join our team. This role will be pivotal in scaling our go-to-market strategy and ensuring operational excellence across sales, marketing, and customer success teams. Role Overview:The Revenue Operations Manager will be the backbone of our revenue engine, tasked with optimizing and aligning our go-to-market operations. This role involves a blend of strategic planning, process optimization, and data-driven decision-making. You will be directly impacting our growth by ensuring our teams are efficient, our data is clean and actionable, and our strategies are well-informed. Key Responsibilities: Strategic Planning and Execution: Work closely with revenue leadership to define and implement strategies that drive growth. Within 6-12 months, you should have established a robust operational framework that supports our GTM strategy..... YOU create a renewal and expansion process for a CSM team Stage 2 Chatbot 1. Customer Segmentation Objective: Tailor your approach based on customer needs and potential. Action Steps: Segment customers by size, industry, product usage, and growth potential. Assign tiers to customers (e.g., high-touch, low-touch, tech-touch) based on their segmentation. 2. Success Planning Objective: Align your efforts with customer goals to ensure mutual success... NOTE: ChatStage2 is in beta — we apologize in advance for any hallucinations or suboptimal responses. Send me a DM to share your thoughts on what works well, what could be enhanced, and any additional features you'd like to see. Also, review the sources under the FAQ and send us any publications we missed to better train the model.  Thanks! https://lnkd.in/ga9ZbdJX

Thanks to those who made it to my speech at #SXSW today. As promised, the slides are below. They include links to Stage 2 Capital's workbooks and templates for you to execute all the strategies we discussed, including: - Using your data to calculate when you should scale sales - Developing and implementing your leading indicator of retention (LIR) to know the moment you have achieved product-market-fit (or lose it!) - Leveraging a bottoms-up framework to calculate how much revenue growth your startup is capable of in 2024 - Devising interview scorecards for your first sales, marketing, and customer success hires - Codifying your GTM playbook to train your first 20 sales hires - Automating 3 forecasting models to create revenue predictability - Designing the GTM section of your board deck Enjoy!