Assessing the Substructure of SaaS StartupsApr 26, 2022
It’s tough for the first VP of Sales to know whether they’re joining a future rocket ship or a zombie startup.
Many would argue that the outcome of the startup is inextricably linked to this hire itself. However, in reality, the substructure is already built or at least formed to some extent before, and that sub-structure is going to have a huge impact on the outcome of your success as VP of Sales.
In an interview as the first VP of Sales, it’s on you to uncover what that sub-structure is made of.
To do that you need to take the founder back to the early stages of when the startup was formed, to their very first customers, the lessons learned and the actions taken as a result of those lessons.
Founders typically like to tell their personal back-story and how the startup came about but very few when interviewing a VP of Sales get into the detail about their inaugural customers. But for you as the VP of Sales, this is where the gold lies. You should uncover the detail in your earliest conversation with a founder.
Consider this framing:
”In my experience, the foundation of the future sales org is built very early in a startup’s evolution, by you the founder. I’d love to get into some detail about your earliest customers so that I fully understand the go-to-market heritage of the company”
Suggest you’d love to focus on the beta customers of the startup, and have them walk you through examples of those customers, hopefully, they’ll name at least 10 or so.
Once you’re there, here are 10 questions you should ask about those inaugural customers, reasons why they are important questions, and what to look out for in the dialogue that follows.
1. Why did you choose these companies as beta customers?
Why ask: There’s a world of companies to choose from, this will give you insight into their perceived ICP and their upper funnel approach.
What to look for: What you want to see is a systematic approach to targeting companies that was successful in garnering both initial discussion and an agreement to be beta customers.
What you don’t want to hear is that they exclusively called on friends to do them favours to be their beta customers!
2. How did you successfully book meetings with them?
Why ask: The outbound motion is critical to understand, it’s highly likely your job is going to be scaling that very motion!
What to look for: Look for something that is documented that you believe you can improve. This is the motion that will likely make or break you. Once again, ensure it’s not a friend’s network because you obviously can’t scale the founder of their network, not sustainably anyway!
3. How did you establish what the KPIs were?
Why ask: Key Performance Indicators are ultimately how clients measure value. It’s amazing how many established companies are not clear on this, let alone startups. However, the very best B2B SaaS startups know there must be a mutual agreement on KPI impact to have strong net revenue retention (NRR) which is critical to the company’s future growth and valuation.
What to look for: Look for 2-way dialogue with clients to ensure that the KPIs were agreed together, and establish that the economic buyer was involved in the sign-off.
4. Were the KPI impact results what you expected?
Why ask: It’s rare that the impact was exactly as expected. So find out.
What to look for: The discussion around how the hypothesis was challenged by the results of the beta is a fun one with the best founders. It’s a great opportunity to get deeper into the mind of the founder, see the follow-up questions below.
5. How did you change course as result?
Why ask: Obviously if the results were different than expected (they usually are) there is food for thought, and you want to understand how the founder processed that market feedback.
What to look for: This is the opportunity to really understand how the founder allows the market to tamper with their vision. There needs to be a healthy rub here. Focus is critical at any startup so I find this part of the discussion really valuable for establishing how set the founder is on their direction, and how much they let the market dictate.
As the incoming VP of Sales, the more set on their direction the better. It’s much easier for you to focus on executing if they are focused.
6. How did the results inform product pricing?
Why ask: If the product is proven to directly support the increase in revenue by $1m per year, then it’s fair to say charging 20% of that value is probably worth it. But charging 80% probably won’t fly.
What to look for: Of course, the value is rarely that binary, however, you just want to ensure the relationship between the value delivered and the price charged makes sense. If the relationship is completely detached, or not measured at all then of course that’s a red flag.
7. How did the results inform product development?
Why ask: You’re really looking to understand how the sales feedback makes it back into product.
What to look for: I’m amazed at how many founders don’t adapt product when the market offers feedback. There’s certainly a balance, however, especially in enterprise B2B SaaS you simply cannot ignore the market and expect to build a sustainable pipeline.
If the product feedback loop is baked in early, that bodes well for the future evolution of the company, and the culture of the sales org you are tasked with building.
8. How did the results impact your ICP?
Why ask: The beta phase should really inform which customer types are in your wheelhouse and most importantly which ones are not. Again, for reasons of focus you want to be sure that this distinction is clear in the founder’s mind.
What to look for: I love it when founders say something like “on the face of it this customer looks like an ideal customer, however when you scratch a bit deeper these are the reasons we would not pursue them…..”. Look for that dialogue.
9. How do you currently measure the impact on client KPIs?
Why ask: What they measured during the beta phase might be quite different to how they measure today, understand how it’s evolved and why.
What to look for: It’s rare they nail it out of the gate, so there will be some evolution. What I look for here is a confidence that the evolution has been positive and logical for the company.
The red flag here is the founder realising that the KPIs they impact are not core and not valuable to their clients. Hiring a VP of Sales won’t fix that.
10. How will you continue to increase the impact on client KPIs?
Why ask: You need to understand their future vision, and this is the question that invites that.
What to look for: I want to be inspired at this point. I want to hear about a future that is both grounded and ultra exciting. After all, if you’re going to be successful as the VP of Sales the journey you go on in the future needs to be one that excites you.
However, ground their answer in the current roadmap. You want to see evidence that they have successfully and routinely shipped new features that clients have seen value in.
Good luck folks, you’ve got this! 👊🏼