We recently had the fantastic opportunity to participate in a presentation by Micah Smurthwaite on the secrets to scaling sales in B2B startups. With his wealth of experience in venture capital and sales, Micah shared invaluable insights that we believe can benefit anyone in the startup ecosystem. Currently at Next 47, a venture capital firm that invests in B2B series A to C, Micah was previously the first sales hire at CloudFlare. He played a significant role in the company’s high growth from a million in revenue to over a hundred million. Today, CloudFlare has reached a billion in revenue. We listened carefully to Micah’s presentation and have organized the knowledge we gained into a Q&A format.
Q: What type of salesperson is successful in a resource-constrained environment such as an early-stage startup?
A: In a resource-constrained environment, such as an early-stage startup, a successful salesperson needs to possess a different skill set and motivation compared to a resource-rich environment. Salespeople who excel in resource-rich environments are often referred to as mercenaries. They are individuals who thrive in large companies with well-defined territories and targets, where they can take advantage of existing resources and support structures. Mercenaries are motivated by established incentives like hitting sales targets or winning awards, and they excel at executing processes like turning the crank in the machine.
In contrast, successful salespeople in resource-constrained environments would be the missionaries. They possess the ability to adapt to a constantly changing environment, and are driven by the mission of the company. Missionaries are more focused on experimentation, divergent thinking, and knowledge-sharing, rather than solely executing a pre-established process. They play a crucial role in helping the company discover new opportunities while continuing to generate revenue from existing markets.
Q: What are some common mistakes startups make?
A: One common mistake is taking a playbook that works for a large sales organization and implementing it in a small sales organization. This can limit experimentation, which is crucial for early-stage companies.
Q: How can you differentiate between a “mercenary” and a “missionary” salesperson during interviews?
A: If the interviewee asks questions like, “How many salespeople in your company made a million dollars?”, they might be a mercenary. A missionary profile is more suited to building the machine at an early stage, focusing on experimentation.
Q: Why is knowledge sharing important for early-stage sales teams?
A: Knowledge sharing is crucial because it allows sales teams to benefit from divergent thinking, different messaging, personas, and territories. It also helps the organization grow and adapt to new opportunities.
Q: How should compensation plans be designed for early-stage sales organizations?
A: Early-stage compensation plans should focus on ensuring knowledge sharing happens. A team goal may even be part of the comp plan, as opposed to leaderboards and accelerators that are more common in later-stage organizations.
Q: What is the difference between being single-threaded and multithreaded in an enterprise sales process?
In an enterprise sales process, the difference between being single-threaded and multithreaded lies in the extent to which sales representatives engage with various stakeholders within the prospective client organization.
When a sales representative is single-threaded, they focus solely on the champion of the product, who is typically an individual within the organization that loves and supports the product. While this person is essential in promoting the product internally, they may not have the authority or influence to make the final purchase decision. By relying only on the champion, the sales representative runs the risk of getting stuck in the sales process.
On the other hand, being multithreaded means that the sales representative engages with multiple decision makers in the organization. This approach typically involves connecting with the economic buyer, who has the authority to approve budgets and purchases, as well as other relevant stakeholders, such as the legal and budget teams. By establishing relationships with multiple individuals in different roles, the sales representative can better navigate the organization’s complexities and decision-making structures, ultimately reducing the chances of encountering a single point of failure.
Q: What is the best sales framework to use in the current market?
A: The best sales framework currently popular in the market is MEDDIC, which has gained significant traction among enterprise salespeople. MEDDIC stands for Metrics, Economic Buyer, Decision Criteria, Decision Process, Identify Pain, and Champion. This framework is favored for its focus on two key personas in the enterprise sales process: the economic buyer and the champion.
The economic buyer is the person responsible for budget allocation and has the authority to make the final purchasing decision. The champion, on the other hand, is the person who loves your product and advocates for it within the organization. By addressing both the economic buyer and the champion, the MEDDIC framework helps salespeople navigate the complexities of enterprise sales processes and reduces the chances of getting stuck or not closing the deal.
In addition to MEDDIC, there is an evolved version called MEDDPICC, which adds two more components: Paper Process (dealing with procurement) and Competition. This extended framework provides further insight into the sales process and helps sales reps to be more strategic in their approach.
However, it is crucial to remember that the effectiveness of any sales framework also depends on the sales rep’s ability to listen and understand the customer’s needs.
The best sales reps spend more time listening than talking, ensuring that they fully grasp the customer’s requirements before presenting their pitch. This active listening allows them to tailor their approach and offer solutions that genuinely address the customer’s pain points, increasing the likelihood of closing the deal.
Q: What is the ideal team structure when selling to early adopters?
A: When selling to early adopters, a team should consist of a product manager who knows how the product works and a salesperson. This combination can effectively address the needs of early adopters and help the company grow.
Q: How do you calculate pipeline coverage needed to hit a sales goal?
A: To calculate pipeline coverage needed to hit a sales goal, divide the sales goal by the close rate of qualified deals. For example, if the goal is $1 million in sales and the close rate is 25%, you need $4 million in pipeline coverage to meet the goal.
Q: How can a startup with only a prototype product and letters of intent from potential customers make a strong impression on investors during the seed stage?
A: For a startup in the seed stage with a prototype product and letters of intent from potential customers, the key factor to make a strong impression on investors is demonstrating product usage and integration into customers’ workflows. While letters of intent signify initial interest and commitment from potential customers, they do not guarantee actual usage of the product or its criticality to the customers’ operations.
To impress investors, the startup should focus on getting the product into the hands of potential customers, allowing them to experience its benefits and integrate it into their daily workflows. It is crucial to gather feedback, testimonials, and other evidence of the product’s value and indispensability to the customers’ operations. This will help validate the startup’s claims about the product’s value proposition and market potential.
Investors will likely conduct customer reference calls to gauge the product’s impact on users. If customers confirm that they use the product regularly, find it essential to their workflows, and are committed to paying for it once the contract is signed, this will serve as a strong indicator of the startup’s potential for success. On the other hand, if customers indicate that the product is not a priority or its integration is uncertain, it will be less convincing for investors.
Thus, startups in the seed stage should prioritize demonstrating product usage and integration into customers’ workflows, as this will hold more weight with investors than mere letters of intent. By showcasing how the product addresses customers’ needs and is already integrated into their daily operations, the startup can significantly increase its chances of securing investment during the seed stage.
We hope that the Q&A format has helped to clarify and emphasize the key points from Micah’s presentation. As you venture into the world of B2B startups, keep these insights in mind and apply them to your unique context. We wish you the best of luck in your endeavors and look forward to sharing more expert knowledge and experiences in the future.