This curated column is authored by Bala Srinivasa, Partner at Kalaari Capital
Over the past six months, I have worked with three of our portfolio companies in helping them hire a sales leader for the first time. The thoughts here reflect some of those discussions, and also my own experiences in leading sales and marketing at two startups at very different stages – early stage (inception to $10 million+ in revenue) and middle stage ($18 million to $40 million+ in revenue).
This is the first part of a two-part series on how to go about hiring your first sales head, as an India-based startup. This is one of the toughest positions to hire for, and often ends in frustration for both sides. It’s even more challenging in an emerging startup environment such as in India.
This write-up is mostly for B2B or B2B2C technology product or service businesses (SaaS or otherwise), where one needs to build a sales team selling directly to enterprises.
Sales leadership in the Indian startup ecosystem
It’s worthwhile talking about the reality of the Indian startup ecosystem from a sales leadership perspective. Most startups in the Valley, or other mature markets, have a relatively deep pool of candidates to evaluate. By deep pool I mean candidates who have worked in a technology startup environment and have had success in helping grow from scratch to some level of scale – say $10- 50 million in revenue. In addition, you also have a strong bench of director-level folk working with these top startup sales leaders. These are young but very promising sales leaders who have learnt the ropes and can be tapped as a new head of sales at smaller startups.
Neither of these two categories exists in the Indian startup environment. This is not to knock anyone, but simply the state of where the ecosystem is today. It is still a very young ecosystem with primarily first-time founders and management teams with limited startup experience. There are many examples of large company sales executives in India making a hash of things in a startup, and on the flip side, founders not providing enough room for a senior executive to operate successfully. This will change and improve as we have more cycles of learning via second-time entrepreneurs, and startup sales leaders, who have helped companies scale, and drive successful exits.
However, given where we are, it is even more important that startups have a framework to think about their sales leader hire and find a match that increases chances of success.
So, when is it the right time?
In general, I would say that until you get to Rs 4-6 crore ($800,000 – $1 million) in annual revenue, the founding team/CEO are the best people to sell. More than a revenue number, it’s the stage where you usually are still trying to figure out your product-market fit, working with early adopters, and trying our various angles. For example, in my first startup, we did not hire a head of sales until we were well into our third year and hit a few million dollars in revenue. Until then, we had a few initial customers, but were still struggling with our positioning and value proposition that would allow us to scale across a segment. Normally, a head of sales is not of much use if he or she does not have a reasonably clear target market, value proposition, and a working product. Even after you hire one, it is going to be an iterative process of product positioning, but you are going to need a working baseline to start with.
Once you get past this stage, you are usually in a situation where organisational activity picks up. You will see an increase in the number of client meetings, inbound calls, requests for pilots/demos, internal staffing expansion in response to customer pull, etc. You also begin to notice that while there is a lot of activity, it’s taking a long time to see results – closed customer contracts and actual booked revenue. As a founder, you may now be fronting discussions with more than half-a-dozen clients as well as attending to all other functions of the company. The couple of sales people you have are working hard but suggest a lot of reasons as to why deals are getting delayed or falling off the radar.
This is usually a good time to start thinking about bringing in your first head of sales. While there are no hard-and-fast metrics, my sense is you may be closer to the Rs 8 – 10 crore revenue number by this time. The right hire should be able to help increase customer acquisition rates, shorten sales cycles, and most importantly build a team that can scale in a consistent fashion.
Six areas to evaluate to find the right candidate
Let’s take for granted that you are interviewing sales talent with a good track record of achieving targets, running national sales teams, and a knowledge of sales operations. There are six areas key areas you should explore with candidates to assess fit for your startup:
- Passionate about the problem and market being pursued: This is fairly easy to read, difficult to fake, and actually not that common. Is your candidate able to discuss the problem and envision how the industry is likely to evolve over the next five years? Are they able to give you client examples or elaborate on issues and concerns with the status quo? It is not essential that they be from the same segment, but their interest is key, as is their point of view, and the homework they should have done. Do they ask you pressing questions on how you solve adoption challenges? The best candidates will engage you in a thought-provoking discussion where you gain insights and confidence. It is the passion that will keep their head in the game during the inevitable tough times.
- Chemistry with founders and product teams: This is a crucial component and something that you gauge over multiple meetings. Given the lack of startup experience in India, your future head of sales does not really have a sense for the heavy interactions needed with functional teams in a startup. Make sure the candidate spends enough time with your product and technology teams and structure the discussions such that both sides have a way to assess and engage. Feedback on chemistry from your other teams could be the tie-breaker that makes you decide on a candidate. For one of our startups, we had two well-qualified candidates – a seasoned veteran from the industry who worked at a large organisation and had delivered large numbers, and a candidate who had succeeded in a smaller organisation without much of a brand name. While both were great individuals, the latter got the job due to higher quality of interaction with functional teams.
- Metrics-driven sales culture: The main reason you are hiring is to bring some level of systematic thinking to how you run sales. This means some one who has a handle on what it “takes to make” your targets for the year. Ask about tools they have used or how they plan to monitor targets in terms of inbound leads, conversion rates, deal sizes, and account growth. If it’s a SaaS solution, can they articulate SaaS-specific, lead-generation activity, discussions, sales order ratios, and how to increase conversion rates? Lack of an effective sales process is an area of weakness for startups, and founders often don’t spent enough time understanding how the new hire is going to make it better. You certainly don’t want someone trying to duplicate a big company process in a startup. However, running a simple but metrics-driven lead generation, conversion, sales pipeline, and deal-close process goes a long way in most cases.
- Creative thinker who can define “your” go-to-market: Successful selling is a lot more than just hunting deals. For an early-stage startup, it involves close alignment of sales, marketing, and product management to deliver on a chosen go-to-market strategy. Is your candidate someone who has a handle on these functions, can help build them if needed, and make adjustments to build your unique GTM? For example, within a quarter of joining, a startup sales leader I know dropped a couple of target segments in a seemingly large category. This was a tough call but done in conjunction with the founder/product team and based on analysis of high-cost-to-serve and low revenue from those customers. This freed up bandwidth to focus on higher-impact clients.
- Ability to hire great sales people: This is a fundamental requirement that you need to reference check. Good sales leaders are able to attract a strong sales team. Ask how they go about the hiring process and how quickly can them assemble a team. Within 3-4 months, your new sales leader should have made a lot of progress in putting a team in place. This includes being able to fire underperforming sale reps and yet maintain a positive atmosphere.
- Hands-on with attention to detail: This sounds banal, but is a key point to focus on in India. Many candidates come from companies where they have been part of hierarchical sales teams. Without startup experience, the tendency is to replicate what they have seen in the past. This ends up with a heads of sales, regional heads in major cities, and sales people reporting to regional heads for a Rs 10-25 crore revenue startup. This structure may work in some cases, but is not optimal, as you want the head of sales to be closely involved with the field at a deal level. It is a time when go-to-market is being fine-tuned, the quality and calibre of sales hires is being established, and every deal is a big deal. Try to ferret out if your future head of sales shows inclination to get into the trenches and work with each salesperson. Do they lead by example in detailing the company sales pitch, cold call/email scripts, marketing messages, demos and anything else that contributes to winning?
It’s unlikely any one candidate is going to check all the boxes. Keep in mind that your product and stage of growth does have a bearing on who is a good fit for that stage. A revolutionary product that the market has not seen before, that has no clear-cut owner/budget for your target customer, requires an evangelical sale. A sales head, who deeply understands the problem/technology, is articulate with C-level decision makers, and is creative about go-to market, may be more valuable than someone who is a purely data and process-driven. The latter may do very well in a startup where the product and market is more easily understood.
Other considerations include familiarity with the business model – SaaS versus on-premises. Again, in India, you are unlikely to find too many SaaS sales leaders, who have had successful stints in scaling a startup. They are more likely to come from larger companies and you need to weigh that accordingly.
Part II will cover the selection process, performance, and compensation, and founder responsibilities.
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