Sam Blond: Why Startups are Doing Outbound Wrong and How to Fix It | E1139

0:00 Where people over index is domain. If you are hiring your first AE, first AEs number one and two, they need to have seen an early-stage startup environment. There are three things that I look for in terms of measuring the success of a sales hire. For almost all startups, the bottleneck to growing faster is actually around demand gen, opportunity creation. Ready to go?

0:39 Sam, listen, I am so excited to have you back on the show. Where it was a while ago since we last made this happen. Hopefully I've improved as an interviewer. So thank you so much for joining me again today. Arie, I'm pumped to be here. Thank you for having me. Last time we did this was I think a month or so after I joined Brex in 2018. The world is quite different six years later as we sit here.

1:03 I mean six years ago, me I'm getting old. But I I do have to start Man, it's a Friday. Dude, you're ancient. I mean, you you are just I mean I want to start with the entry into sales before we dig into specifics. What was the entry point for you and when did you realize that you loved sales? I attribute a a couple data points of luck to it to being in sales and in tech sales in the first place. So I graduated from University of Missouri in 2007.

1:36 And I wasn't considering like you know, but for my brother being in the Bay Area doing tech sales, as a graduate of the University of Missouri, that's not even allowed your radar. I got a job as an SDR at a company called EchoSign. So I sort of lucked into getting into tech sales in the first place because of my brother, and then I locked into joining a successful business like EchoSign that allowed me to progress my career. I didn't know what I was looking for at the time. And fortunately, I found Jason Lemkin, who's a friend of both of ours, that was leading this company and joined as an SDR when it was effectively being run out of a garage, an actual garage in Palo Alto. The question around when did I start figuring out that you know tech sales was for me, something like that. I was able to start differentiating myself from peers doing the same thing. The feeling of being successful was addictive. And so, you know, it was it was pretty evident to me early on that I had found something that aligned well with my skill set that that, you know, eventually evolved into a tech sales career. Dude, I think momentum and confidence are two of the most important things to have in a team because as you said that success is so addictive. I always think how do I create that momentum in teams?

3:03 You've been in sales respectfully then for Christ, 17 years without aging you. So, with that in mind, what do you know now that you wish you'd known when you started 17 years ago in that garage with EchoSign? I didn't at the time appreciate how hard building a successful startup is. You know, I took a handful of interviews when I first joined a company and you know, EchoSign gave me an offer, maybe I had offers from other people. I probably looked at like, you know, the comp or something like that. And one of the things was how far is the commute to make my assessment on which firm to join and you know, the reality is the the importance of picking the right company it- it- really defines one's career. I attribute so much of my success to joining the right businesses. now like I was able to perform within those businesses. And you know, for context we're talking about EchoSign, Zenefits, and then Brex on the sales side. So much of my success was predicated on the success of those businesses. And I don't know that I had an appreciation for one, how hard it is. And two, the importance of it picking correctly.

4:25 Okay, so on that note then, for people listening going, I want a rocket ship career. I want great trajectory. Sam, how do you pick which company to hitch your bandwagon to, so to speak? It depends on the stage. So, there there are companies that are, you know, a hundred hundred to five hundred employees, let's say. There's a lot of signal around those companies. The trajectory with which they are hiring, the the sort of like what I'll describe as heat around fundraising that exists for those businesses, the revenue growth that those companies are experiencing. And so you can join a one hundred person company as the tenth sales rep. You have a lot of sort of historical signal to go off of that you're picking a company that is a rocket ship to use the cliche. We'll have to come up with a better word. You know, earlier stage, it's much more subjective, right? The things that I mentioned there around fundraising events, employee head count growth, revenue growth, those are all things that are objective. the subjective side of things and what I think I was able to get right at Zenefits and Brex, so much of the success of a really early stage company is predicated on the the founder. Founder or founders.

5:48 And their ambitions and aptitude to building a big business. and I remember you know, this was this was further in my career, but when I joined Zenefits, I think I was 29 years old. And I was fortunate to have Jason, again from EchoSign, who had moved on from Adobe. He was introducing me to a number of startups. And I started to sort of pattern match around what I believed an exceptional founder looked like. And not physical looks, of course.

6:19 but you know, by the time that I met Parker, Jason had sicked Parker from Zenefits. Jason had signaled one that like, you know, Parker is incredible. They're raising a very competitive round at Zenefits. This this could be the one. Something like that. and I met Parker and he was in in the best way possible, just different from everyone else. And I knew it. It didn't matter what Parker was building. If it what he was actually building was all-in-one HR, which like it doesn't sound it is not sexy.

6:57 I just wanted to join this guy's company because he was going to build a hundred billion-dollar business. Yeah, we we didn't realize that outcome with Zenefits. He's going to with Rippling. so, you know, it's all an intuition there. Sam, when you're joining such a rocketship in sales, are you not just an order taker? I don't mean that disrespectfully, but like, when it's like being pulled out of your hand, it's quite a fun being in sales, isn't it? But when you are slogging your guts out in enterprise sales, in long sales cycles, it's it's a different game.

7:37 Is it not quite easy when you're at a rocketship? I think in any sales environment, there is a lot of nuance that leads to huge discrepancy in performance. And so, you described you know, there there of course sales environments where selling the product is more challenging. There are sales environments where the sales cycle is significantly longer. There sales cycles where the AEs are controlling more of their investment through outbound versus taking up leads for marketing and inbound. but what happens seemingly universally, even at the best companies in the world like Zenefits in 2014, is there are outlier performers that perform at something like 3x to the bottom performer. And so, you get a team of like 10 people, even when you're in an environment where the product is flying off the shelves, there is still this huge discrepancy of performance. And I love sales because it's so objective compared to other areas of the business where you have a 10x, you know, performer. And and it's it's it's like hard to hard to know that. Or or certainly harder than it is in sales. And so, that's what comes to mind. Like, of course you want to be in an environment where the business is doing well. but it doesn't mean that the role becomes easier or you know, your success is more guaranteed or anything like that because you still need to be the best. If you want to get promoted faster than anybody else, if you want to make more money than anybody else, you need to be number one. And it doesn't matter if you are at a startup that is less successful or the hottest, fastest growing startup there is, those dynamics still exist.

9:27 So, I want to discuss the team build-out. This is one of the most challenging areas for founders. You mentioned that kind of you need to be number one. We need to get a team in place first, Sam, in this hypothetical situation where you are advising me, a terrible and inexperienced founder. I mean, you don't need to imagine that hard. It's not difficult. But let's start with a very challenging question, which is how do I sequence sales hires?

9:55 The way I start is hire two individual contributor account executives. Those are sales reps. Always start with two. There are a bunch of reasons why. We won't go on too much of a tangent here as to the reasoning. Once you have two successful individual contributors in seat, you probably want to take a parallel path of hiring more individual contributors and hiring your first sales leader. Because once you have two successful votes in place, you're sort of qualified to bring in a great sales leader. When I joined Zenefits, there were two successful sales reps. When I joined Brex, there were two successful sales reps.

10:35 The the recruiting process of a sales leader is going to take time. You don't want to entirely stall the business as you are taking the four to six months possibly to find the right sales leader. And so these parallel paths of continuing to hire individual contributors and hiring your first sales leader are often times what I recommend. Once you have a sales leader in place, you can then start to do some specialization like hire an SDR.

11:04 I don't like hiring SDRs prior to hiring a sales leader because they need a lot of hands-on management. to go deeper in a chronological order, specifically. We mentioned We managed to just say it follows cohesion. We mentioned that, you know, hire two at a time. Before that point, does the founder need to be the one to create the playbook? And do they always need to be the one to sell? I argue yes. People tell me I'm full of You're not full of it you're absolutely correct and it good good point on the the sequencing here.

11:39 So, I I jumped right into when when you are ready to hire, but what are the signals that that you are actually ready to hire? You should have a handful of non-friends-and-family revenue-generating customers and a process that you believe is repeatable in terms of generating more of these customers. The reason that I say handful is because it it's not the same for businesses that differ from one another. If you're in a very transactional business like Rex was, Rex actually had tens of customers before bringing on their first sales rep. Now, if you're more of an upmarket enterprise-like product, your ACV is six-figures, you may actually only have two or three paying non-friends-and-family, what I'll describe as more enterprise-like customers before you're ready to bring on a salesperson. But, look, if if you as the founder cannot close customers and generate revenue, people that sort of specialize in sales will definitely not be able to.

12:44 There is no one better qualified to acquire your first set of customers than you as the founder, regardless of sort of your professional training. and so, do not hire a salesperson before you have customers. Okay, Sam. Very as as specific as possible. I now have customers. We mentioned those enterprise customers and revenue-paying non-friends-and-family. And now I'm going to go out and hire my two reps. You said two, okay? We're going to make them fight to the death like Hunger Games. kidding obviously. That'd be It'd be immoral to suggest such things.

13:23 but my question to you is, what's the profile and where do I find these people? How how do I hire them? Profile, the things that I would solve for in the one specific thing that I would not, and then we'll get into sourcing. The things that I would solve for early stage startup experience. If you are hiring your first AE, first AEs number one and two, they need to have seen an early stage startup environment. Do not hire from an extreme example being Salesforce, but gosh, even today, you know, don't hire from a rep who came from Rippling and joined Rippling when they were 500 employees. The experience that they're going to have onboarding into that environment is radically different from what they will experience onboarding into the newer environment. And so, I would qualify this as something like one of the first 10, ideally 10, AEs at a startup, and the earlier the better. So, early stage startup experience is, you know, top of sort of like profile things that I would solve for. Next on the list is they have to have a track record of success.

14:38 sales is objective. You want to hire the best possible person that you can. If they're coming out of an environment that had eight sales reps, you really hope that they are one one or two. And we're going to talk about how to solve for that in the like category of sourcing. So, track record of performance, early stage startup experience. You want somebody who has seen similar deal sizes with similar company types, company sizes specifically. So, if you are a very transactional sale, selling into companies less than 100 employees, you do not want to hire somebody who is a field sales rep coming from deals where they, you know, they closed a deal every 6 months and these deals were six figures. So, you sort of want like the deal size being the ACB and the customer segment that they are selling into to be similar.

15:33 the last thing that I will mention that people over index on, where people over index is domain. And so, if we are taking something like let's just take EchoSign, which is electronic signature product. if Jason had solved for hiring people from either DocuSign, which was like the direct competitor, or from like a company that generates documents. Like like similar similar category. so, they just like, you know, understood the space a little bit better, it could talk the talk. That would have been the wrong trade-off because it's already so hard to find an exceptional early stage track record of performance sales rep.

16:17 If you are sacrificing or making a trade-off on somebody who is who is senior domain, you're you're sort of definitionally trading off somewhere else. And that is the wrong trade-off to make. You know, I I'll not to make this about me, but I'll now make it about me. Electronic signature, all-in-one HR, Zenefits was a health insurance broker that had HR software, and Brex was credit card fintech bank account. These are radically different types of software. And I think that people who are effective just pick this stuff up pretty quickly. So, I'll pause there.

16:52 Any any follow-ups before we move on to sourcing? Yes, I do. I'm the founder. That sounds great. They need to have been early and seen the stage, one of the first few reps, and they need to have an early track of success. Sam, from that description, that sounds like someone of your caliber. You are few and far between. Just let me finish here. You're few and far between. You're very expensive, respectfully, and it was impossible to hire you. I'm just a startup, dude. You're not going to join me again having seen what you've seen and having Are we not living in a bit of a dream world having this early track at of success also trying to get them to an early stage startup?

17:35 it's the right question, but in it is surprisingly the in like number of these people is quite high. If we think about, you know, how many technology startups and by the way, there's one thing that you don't necessarily need to solve for here. And that is you should you do not need to solve for the logo. Meaning this person doesn't have needed to be an early sales rep at a company that ultimately realized a multi-billion dollar valuation. In fact, you know, there's there's logic to the inverse being true where if they were a sales rep at a company that had a product that was harder to sell. If if your product is easier to sell, that they can sort of be freed that they will they will be more effective at selling. That said, if we think about the number of early stage startups that hired up to 10 sales reps over the last 5 years, that's a large number of startups and that's a large number of people. And so, you know, when I joined Brex, the recruiting ground for me was fertile.

18:45 There there were countless AEs that I could could recruit from my personal network that met this criteria. And so, you'd be surprised at how how many folks there are. Now, there are also a lot of folks who are less good. Meaning they weren't hit the top of the leaderboard. But if we just multiply the number of startups that have existed over the last 3 years times the top two or three sales reps, we're in the thousands. There're thousands of these people that exist.

19:14 All right, I can buy that. So, then there's thousands of these people, it's bigger than we think. Great, what a relief. I was getting worried there. so, how do we source them? We get a G sheet out and what does that look like? Yeah, so so maybe and I'll try and do this throughout our conversation. Here's what I see most folks doing. What I see most folks doing, so Harry, you are an exceptional founder. you were number one at your class in your class at Stanford in computer science and you you maybe were like, you know, the the CTO at at a great startup prior to joining me. Your background is not sales. Your personal network is not sales. It's engineering, you know, so you got recruiting your first set of engineers which came easy for you. It was just like your your Stanford classmates that you were friends with and it was folks that you worked with that Rippling prior to starting your company, okay? But now it's time to hire sales people. You you you aren't close to sales people. This is not your personal network. What most or many folks do is they they leverage something like an external recruiter. And you know, they have a recruiter send them candidates that they look at their resumes and then they interview them and they spend a bunch of time on interviews with potential sales candidates.

20:41 And the reality is the the best these people that you were talking about, Harry, how many of these people do exist do exist in the world? Most of them do not go through a third-party recruiter. They want to go somewhere where their reputation precedes them a little bit. And so, sourcing by leveraging your personal network is just of the utmost importance. Now, there are a few flavors that this can take shape. The first is you might have been a you know, successful technical lead at a prior company. Like go go potentially recruit from the sales team there where you may know some of the sales folks. So, that's your personal network.

21:30 taking Brex as an example, our first couple sales folks before I had joined came from our our CFO at the time. His name was Michael Tanneau Bomb. He recruited them from SoFi. So, you can leverage the networks of some of the folks on your team as well that are bringing in your potential early sales reps. you can leverage your investors. So, Harry, you're an investor, you may know some exceptional AEs that you can help place at some of your companies, certainly refer to potential founders. but this leveraging of your personal network I I would not stray from that. And to take it one step further, at Brex, we did not use recruiters, internal or external, to source candidates for the sales organization ever. I hired the first, let's call it five folks from my personal network after the first two sales reps came from personal networks of people that were already within the company. After I hired those five people, they had personal networks. I'll I'll be specific. I hired a guy Brandon Boyle who just crushed it at Brex. He brought it He came from Gusto. He brought in the number one rep from Gusto as soon as he joined. And so, you're you're just constantly leveraging the the networks of the existing team, of your investors, and of the successful folks that you hire, and the probability of success is just so much higher for a number of reasons.

23:03 Is a good hire today better than a perfect hire in the future? You know, I'm sure I'm a founder now and you got Matt Matt Matt Sam. He's yeah, I think he's good and I like him and the co-founder likes him. Yeah. A couple of things off but should be fine. There are always sacrifices. I don't know if there is such thing as the perfect candidate. There are a few things that with these early hires that I would not sacrifice on. I referenced a few of them. there's another one that Jason loves to talk about and that's would you buy from this person? So I think what you need to do as a founder is you need you need to sort of decide what what are the areas that I'm open to sacrificing and what are the areas that I'm not? and then solve for the areas that you are not open to sacrifice.

23:55 Do you do case studies? Do you test it literally? Meaning if you have the chance to do a case study? Yeah, Sam. Sell me Brax or sell me your prior company. Oh, I think I think the prior company is a really interesting one. Because I think what's hard about sell me my company. Meaning, you know, let's let's say sell me 20 VC, right? You're a 20 VC expert and I'm not. So you know how to pitch this product better than anyone in the world and they're almost like destined for failure but they should be exceptional at pitching their existing product. And so if they can pitch you and you know, yes I would buy your existing product from this person and that should be an easy exercise for the rep to go through. I like that area.

24:41 Yeah. I I think it's important in some ways. so yes, okay. So with that, any advice to me on I'm loving kind of this chronology. So we we've got these two. We want to make them an offer. Any advice on sales comp, Sam? I've got no idea. I'm I'm giving these two reps it's the first time I've hired them. What's the right way to approach sales comp for the first two? You know, I think for the for the early ones, I I think you probably should have the conversation around just like what are your comp expectations. You you're probably going in with an idea of what you believe is market rate for the hire that you are making. Let's just say like, you know, at maturity you think this sales rep is going to be able to close something like a million dollars in ARR. We're a mid-market sale.

25:27 You know, and we can we can afford to pay somebody in this role, let's call it 200k. you know, we're early stage, so we're going to give them a bit more equity. We think ballpark is going to be like 160k total comp. That's like, you know, where we think it is. Harry, you're the candidate. you know, what are your comp expectations? Well, Sam, today I'm at 180. My company's a little bit bigger. I would you know, I I take a little bit of a hit there. And you know, you go in at at 160 and you give them a bit more of the equity of the company.

25:59 But I think it's not one size fits all. You don't have an idea based off of how much revenue you think a sales rep can generate at maturity. AE range, 100 to 250 is is like the AC is the total comp for a sales rep. So wide range there based on a number of factors. Sold. We got them. We got these two reps, okay? So they're they're joining now. you know, onboarding it just freaking sucks everywhere you do it, right? And I've never hired reps before in this hypothetical situation.

26:34 they turn up on day one. What do I do for onboarding, Sam? Like how do I set them up for success as best I can? Yeah, this is where I the startup experience is so important. hopefully the rep comes in understanding a little bit of what they need to be successful in an environment where there isn't a lot of structure and there is a lot of ambiguity. So, you know, you as a founder can be confident, here's your computer starting day one.

27:03 I'm going to teach you as much as I know about what has been effective for selling here, but you know, what what ideas do you bring to the table for us to generate and to close more revenue. And so, you know, only setting them up for success by giving them access to any information that they need. And then you know, the the sort of like next iteration of this area is, how do we then measure performance and success of this new hire? And you know, ultimately it's going to be around generating revenue, their ability to generate revenue. I think during, you know, 30-60-90, you probably do want to have agreed upon objective measurements of success. Going to be different for every company, but you want to be transparent about here are the things that are important over the first 30 days. Here are the sort of like milestones that we would like you to achieve in your first 30 days. Many of them are going to be objective, some of them are going to be subjective and just, you know, your your as a founder watching them sell, is this person picking this up quickly or not? It's slightly subjective. And then as we mature, there are three things that I look for in terms of measuring the success of a sales hire. This is true for the first hire and this is true for the 10th hire, the 100th hire. The first is performance. Super objective. sales, you know, it's it's how much revenue is this person generating, where do they stack rank on the leaderboard?

28:35 The next two require no skill and are more subjective. The first is effort. is this person working hard, setting the bar for what hard work looks like." And then the third one is attitude. Is this person reflecting positively on their peers? Are they you know, coming into the work coming into the office motivated with a smile on their face, positive about the environment?

29:06 You know, how do they handle change, those sorts of things. And if number one doesn't exist, meaning if the performance isn't there, you sort of default to, "Okay, what is the effort and the attitude like?" And if either are lacking, this is either like a zero-time or one-time conversation with the person around performance. Can I ask you, sometimes it takes quite a lot of time to ramp, especially in an enterprise sale. The numbers won't be there early on. How do you really And my effort, it's a little bit it's a little bit hard to tell. And if you're a founder and CEO, you've got other shits to rather than just mon- monitor Sarah's effort levels, which are pretty subjective other than just kind of looking across the room.

29:52 so, my question to you is, how do you measure success when the sales cycles are super long? And is effort really that easy to tell? I think the everything depends. you know, I grew up in a world where people were in the office 5 days a week. And yes, it was it was easy to tell who was working hard and who wasn't. And you know, especially in sales, one, there's the like, when are they getting in and when are they leaving? And then there's also the, you know, gosh, this person, I hear them on the phone all the time. and you could just sort of like see and hear the acti- activity levels, especially in sales. you know, some folks they are remote and that that is a new challenge. I think Harry, though, if you make the right hires, there are metrics that you should start seeing improve almost immediately regardless of how long the sales cycles are. Some of those metrics will be things like the number of opportunities that we are working. Harry started 2 weeks ago.

31:02 Harry he immediately started pounding the phones. He came up with this like really creative outbound campaign and we're like I'm joining calls with Harry with the you know Square. we've got we've got a demo with Square today the CFO that Harry broke into the account and now I'm the founder CEO. This is an important call that I'm joining like high five to Harry for breaking into this account. Square's now in the pipeline. This was a real call.

31:32 and so even if your your cycle times are long there are sort of obvious metrics that should be improving if you have made the right hire. It is sort of easy one is around opportunities and pipeline that you are tracking. How long does it take to know if you've got someone's Oh man. I think it's like a week. I think people are way too nice. I know in a week if someone's good or not. You know that it it's funny. I the number that was coming to mind for me it almost doesn't matter how long the cycle is with these early hires in particular.

32:11 I I think 30 days. and in in here you're you're probably closer to right with your week. Most of you know many folks say a quarter. Many folks say 9 days. That that seems way too long for me. If you hired me I'd show up on day one with like segmented customer lists the buyers in English. I would be ready on day one to email them ready to go with my email. I would have already done Canva marketing collateral that I'd done in prep for the day ones. Like hit the ground you know on day one that that's good.

32:44 You only get one chance to make a first impression. And so, you know, it generally doesn't get better. which I think sort of piggybacks off of your comment, Harry. If you're having sort of like performance expectations conversations really early on, you know, I I think that is that a bit of a red flag. But, you know, not it's not one-size-fits-all, once again. Sam, what's your biggest hiring mistakes? Everyone makes mistakes. My mother always tells me I was one.

33:21 You rather ask Barry high expectations cuz you're crushing it here. Well, then okay. I think my biggest hiring mistakes were pretending that concerns that I had in the interview and hiring process didn't really exist. In sales in particular, you know, it it is performance-based. But, it's also like the team dynamic is so important. Like this concept of building a winning culture. And and having people that are positive influences on their peers. You cannot have, folks, that sort of sit around and complain about the product or complain about marketing or whatever the like complaint of the day is. Because it rubs off on their peers. And before you know it, you have just like an unhappy is negatively impacting the broader team. And I have probably rehired or hired people where you know, this concern had been flagged. Where it's like, you know, they hit quota but there there is some serious baggage that that comes along with this person.

34:44 It's like, oh, they hit quota. We need to hire 10 people. Come on, like join. And and so, you know, that's one example, but I think it's it's pretending that things that were concerns in the interview process didn't really exist because like either they were coming from this place or I I I just put that again be sort of blinded and then those things often times come to manifest and bite bite me. So, we've got we've got our sales team. They're they're doing okay, but wait, they're not actually doing okay.

35:18 And there's something that's not working. How do most founders diagnose bottlenecks in growth? And how do you advise the right way to diagnose bottlenecks in growth now we have the team in place? You know, I did some consulting between Zenefits and Brex and I talked with founders as part of my role at Founders Fund at my prior role at Founders Fund regularly. And the conversation almost universally goes something like this.

35:51 Harry, we're sitting here in late March. Let's just pretend the quarter ended and you know, we we missed our revenue target. And when I ask why did we miss our revenue target? almost universally the answer is something like we had a couple big deals that had those big deals just closed, we would have hit our plan. And you know, unfortunately they pushed and we missed, but like, you know, I'm sort of diagnosing our problem with we we didn't close you know, company A and company B that were in the pipeline.

36:28 And the reality is that I would say for four out of five startups, maybe more, what they are effectively diagnosing the problem or the bottleneck to growing faster as is conversion rates. And for almost all startups, the bottleneck to growing faster is actually around demand gen, opportunity creation. If you think about just sort of simple version of this, if everything else remains constant, and you are able to 2x the number of opportunities that you are creating, you have effectively just doubled your sales. And doing the same thing on conversion rates is much more difficult to do. Meaning, you know, 2x-ing conversion rates is far more difficult than focusing on generating more demand or focusing on opportunity creation.

37:27 Why? Like, actually, I I I I'm pushing back in a respectful way. You can carve out a much more structured sales process, be more involved as a founder in that sales process. I think actually, if you want high-quality great leads, they're hard to come by. Like, 2x-ing that, I don't know if that's easier than increasing conversion. And I'd rather increase conversion because then we're not going to, once a lead is not converted, even harder to get them back a second time. So, I'd rather increase conversion than just burn more leads.

38:01 What I find is the environment that exists for most tech startups is what I would describe as a lead poor environment, where you look at the calendars of the sales people. Harry, you just hired two sales people. And you know, we're we're this phase of the company where it's now you and two other sales people, and I pull up the calendars of your two sales people, and they are spending an average of 1 hour a day customer facing. This is, whether it be, you know, new demos that they are taking or existing pipeline where they're following up with a customer.

38:41 And they are clinging on to any possible opportunity that exists in the pipeline. And they're sales people, so they're sort of waiting for more opportunities to come in. Because, you know, their focus is on closing the deals. And we don't have anybody in marketing, and I'm a founder, I've got all this other stuff going on. And so, you know, if I'm spending 1 hour a day customer facing as a sales person, I'm clinging on to the limited number of deals that I do have, that creates an environment where I am incentivized almost to hurry to tell you as the founder, "You know, this deal actually has a good chance of closing." Even though it doesn't. Because I've got to tell you I have some form of pipeline. I can't tell you we're going to close nothing this month.

39:27 But if I had more opportunities, if my calendar was more full of demos, we would be closing more revenue. And I just believe that demand masks a lot of other potential problems. And almost all startups, the bottleneck to growing faster is demand. We are we are constrained by the number of opportunities that we are creating. We are misdiagnosing this as a conversion rate problem. And our resources and our focus are being mapped to where we are misdiagnosing the bottleneck, which is the middle of the funnel. We have more sales people than we do people focused on opportunity creation. Our focus is on the deals that are in the middle of the funnel. We All of this resourcing and attention should be all about it generating new demand because we will that is the bottom that's growing faster.

40:23 I think we are horizontal products in a lot of ways. You know, you sold quite horizontal products in the past in terms of to a broad customer base of industries, not just I don't know, the auto industry or the whatever industry you want to focus on. I think it's like packaging is one of the biggest problems. Getting it to resonate with customers, valid close sales playbooks. I find so often people try and be everything to everyone and then it doesn't hit with anyone.

40:49 That's one of the biggest problems I find. The thing that really differentiated Brex in the early days was the underwriting model where we used the cash balance to issue credit versus a personal guarantee from a founder based off of their personal credit, which is the way that all of the credit card companies did before Brex. We actually weren't the first to do that. Divvy, who was a competitor of Brex, they started before Brex and they used the same underwriting model. But Divvy sort of approached the market as we are going to be a corporate card for any type of business.

41:26 And Brex launched as the first corporate card for startups. So we were really explicit in our branding around what we were, we were a corporate card, and who we were for. We were the first corporate card for startups. And because of that, we gained really meaningful market share in this vertical of technology, the segment of startups, because of the branding association and the focus that we had. We took the innovators dilemma approach, which was we went after a small segment of the market, very differentiated product, gained huge market share, and expanded from there.

42:09 And so, you know, at least in that example, it was really effective. So, I I totally agree and I I remember that so well. It was like wildfire when it was like when it was so proliferated among the startup class, especially in YC as well. It had this unique channel acquisition as well, which I think is so important. And with more specialization, you get higher conversion rates in channels because you're more targeted messaging-wise. So, like I I think that's really important. You mentioned about kind of generation.

42:37 Reps expect things to be handed to them. Marketing are not geniuses. And not in a disrespectful way, but they're not magic. They can't just Who is responsible for lead generation and how do you think about that? Well, certainly in the early days and I would argue as companies progress as well, I you know, if you only have two AEs, those AEs have to be responsible for generating some of their own demand. that often takes form of outbound, but they can come up with clever ways to generate demand outside of the outbound. But, sales people should absolutely be responsible for controlling their own destiny in a way, generating their own demand that often manifests through outbound. I think this is true on day one. This should be true on day 1,000. I'll tell you a quick story about Brex, where I think you know, it really illustrates the importance of this point. When we were a relatively mature startup, so, let's call it $50 to $100 of annualized revenue. One of the things that we noticed was that the AEs were sourcing far more of their own revenue than their SDR counterparts.

43:56 so, even though they were full cycle, they were also losing this revenue. So, you have an SDR who's spending 100% of their time on outbound and then AE who is spending, let's call it 50% of their time on the on outbound, and the AE is sourcing more closed revenue. It shouldn't be that way, Harry, right? But, it was. And the reason behind that is because AEs had their opportunities converted at higher rates. And the opportunities that they were generating generated more revenue.

44:30 And it's because AEs had this intuition around what a quality opportunity looked like, which companies would spend more on their card. And so, they were sourcing higher-quality, higher-revenue-generating opportunities than their SDR counterparts were. Now, of course, we took this information, we made a bunch of changes. We sort of took away the ability of SDRs to decide which accounts to go after. We said, "These are the accounts that you should go after. These are the people you should reach out to in these accounts." because we know conversion rate by persona. We also changed the model by which SDRs were compensated. They were originally compensated on opportunity creation. We moved it to revenue.

45:16 Eventually, SDRs began sourcing more revenue than their AE counterparts. Now, the AE counterparts, they didn't change. They were still sourcing the same amount of revenue. But, SDRs caught up. And we get none of these insights, we drive none of these changes if we don't have AEs sourcing their own revenue. so, that's one example of why I think it's important. But, ultimately, I think that, you know, it's a missed opportunity to not have AEs like if we think about ROI on AE time.

45:52 Number one is closing revenue. There's no higher ROI than an AE spending their time closing deals. Number two, sourcing additional revenue. And so, if they aren't spending 100% of their time, let's call it 45 hours a week, closing deals, whatever that excess time is going towards, it is less ROI positive than sourcing their own deals. so, I think they should be doing so. Are we entering a world where SDRs are like a bit old school, right isn't it? Bit bit of cold outbound, that sounds nice.

46:28 In a world of content, short-form video, creating audiences, creating community, you know, really people are sold before they even enter sales processes now. I think there's a guide on the thing that says like 88% know that they're going to buy when they enter a sales process. I'm butchering the number, but it's it's it's a high number. Like the old SDR, Sam, I like your post about, you know, HR integrations. We are a great provider. Is that not gone and we've moved to a world of content now?

46:58 It's the right question. I love outbound. I love sales outbound. and I think, you know, what what you're describing, Harry, is a form of outbound that I think is not effective. And and maybe maybe let's let's let's approach it like this. What I see most sale early sales reps, SDR teams, startups, what I see most folks doing is they purchase, you know, CRM, they purchase ZoomInfo to get contact information, they purchase outreach to have email sequencing, and then they write like a you know, version of the copy that pitches their product a little bit, and then they drop the universe into seven email sequence outbound cold email. And Harry, these are going like we're we're we're a 10-person startup.

48:03 Nobody knows who we are. Harry, you are 22-year-old SDR that just started at our 10-person startup. Nobody knows who you are. So, you're sending an email to let's use your example that that VP of HR at Brex, 22-year-old SDR, 10-person startup. It's the 12th email that they have received today trying to pitch them on a payroll or whatever product they're pitching them on, and it goes right into the trash.

48:34 So, everyone most people, sorry, not everyone. Most startups are doing outbound wrong. I think the way that startups should be approaching this. First is on who you are targeting, and then how you target them. So, who you are targeting, think about the universe in terms of concentric circles. And you want to start with the sort of like closest concentric circle to your business. So, Harry, we're still this 10-person startup, okay? You, Harry, in your you're the founder, you have a personal network that is a bunch of other founders. So, we're going to start going after companies that are in your personal network. We've also raised a seed round from a number of different investors. We're going to leverage the networks of our investors. We've got 10 employees.

49:30 Our engineer they they were at three companies before they joined our company. They've got a bunch of connections that they can reach out to at other early-stage startups. Let's let's leverage their personal networks. Okay, now we're starting to acquire some customers. Some of these customers are really happy. How can we leverage these customers to generate additional customers? Hey Harry, you're VP of HR at this company.

50:02 Do you know anybody else who could leverage our product to realize some of the same value that you are realizing? Because you know, the HR community is is sort of tight knit. So, I I just think the way that we are doing outbound or who we are targeting is wrong. Think about the world in terms of concentric circles and you know, like closeness to the business. At Brex, we started with personal networks. We moved to investor networks. We moved to YC companies. We moved to former YC companies. We then put billboards up all over San Francisco and we targeted companies that were headquartered in downtown San Francisco that would walk past our billboards.

50:42 These concentric circles just keep getting further and further out until you get to the point where you have such a brand that you can email the VP of HR. You are no longer a no nobody company. You are Rippling. And VPs of HR at 250-person tech companies, they know Rippling. And the probability of getting a response to that email is just significantly higher. But you don't get there on day one. Okay, you got you got it it's it's a process. So, that's on who you are targeting. Now, the way that you target them.

51:18 I think you know, you really want to have contrarian, you know, really demanding efforts, but specifically contrarian outbound efforts. And I've talked about a champagne campaign that I did at Brex where we sent founders of bottle of champagne early on. and you know, congratulated them on a recent fundraise. That's differentiated. It received a ton of responses. I I think you know you just want to come up with something that is different from what everybody else is doing that stands out. It often times can come in the form of you know some some physical delivery a handwritten note. You just want to be different.

52:04 I totally agree with you in terms of just wanting to be different. You know what worries me a lot of the time that I see now is that like a lot of companies I'm in they'll have this like quite intense SDR AE sales function. They'll have CS functions. And the ACV is a 10K and it's like and they're like but it'll scale it'll scale Sam. It rarely scales. And so we're layering on this enterprise cost base for this very SMB PLG revenue base which has really been born out of the PLG motion and I'm seeing a a generation of companies have economics because of this.

52:46 Do you see it too and am I just getting jaded and old Sam? I think the approach to acquiring customers and how much you can spend on that it needs to be influenced by your ACVs. And your LTVs like if you are Brax the LTV is much longer than I would imagine a people management solution maybe not but other solutions which are just generally shorter. Yeah within different businesses you you have different segments of customers and you can approach acquiring one customer very differently than significantly larger customer that generates more revenue. But what you can't do is scale that down and so I used this this example of we sent bottles of champagne it was 40 bucks a bottle.

53:36 You know it's expensive like after delivery maybe we're we're upwards of 60 bucks. You You spend that you know, on customers that generate $100 a month in revenue for your business. And so, if if you think about the world or your company in terms of multiple businesses based off of the segments, you just target customers differently depending on how much revenue they're going to be able to generate. It's It's certainly not one-size-fits-all. I I totally agree with you that. One thing I worry about with outbound this as you mentioned like oh, people get 10 emails a day and all that.

54:12 I think they're about to get 100 emails a day and I think they're about to get 100 text messages a day and 50 WhatsApps. I see so many WhatsApp sales tools now as well. AI is going to massively increase the amount of outbound sent. Will we see the commoditization of outbound with the rise of AI? I think that what I'm seeing is the tools today are making the the the category of outbound or the function of SDR or AE more effective. In the same way that something like or or they're streamlining a lot of manual process. The same way that something like, you know, Outreach did a number of years ago. Earlier when I joined EchoSign as an SDR, Marketo existed, but I was manually sending all of these emails one at a time. I'd like copy and pasted and then I'd like put in somebody's name and then I'd hit send.

55:18 But it was a very manual process and along comes Outreach and I'm able to send like 100 at a time. And that allowed me to you know, be far more efficient as an SDR, but it didn't get rid of the function of SDR. In fact, like maybe there are more SDRs in a world where Outreach exists than there were before. And you know, I think we're continuing down this path of automated, you know, now we can personalize emails. The The AI is going to write me an email that knows things about Harry that I wouldn't even be able to find out if I spent a bunch of time researching it. So, you know, the AI is going to write me copy as well. I think what, at least today, AI does not accomplish that humans still do is this this aspect of being creative. You know, the The AI isn't going to tell you, "Here is your contrarian or unconventional outbound sales campaign that is different from what everybody else is doing." And, you know, that's that's generally going to come from a human.

56:25 and, you know, there is a process that I go through to determine these things if it's helpful. Yeah, I'd love to hear it. For each different channel, I love to do just a whiteboard session. And, you know, outbound is one example. So, let's take the outbound example, but this applies to to so much more. And then I'll give specific examples of outputs that this process has produced. So, with outbound, we want to be different. You know, at at a 10-person startup, Harry, you're the founder, you're going to be in this meeting, the two sales reps are going to be in this meeting, and then maybe we have like somebody in growth. That person's going to be in this meeting. So, we've got four people in this meeting.

57:05 We are going to do it up at 8:00 on Monday evening meeting. It's the end of the day. We're going to do a whiteboard session. This meeting can go until midnight. There's no end in sight because it's the last meeting of the day. Okay, everybody come in with your top three ideas on what you you suggest we do that is different from what everybody else is doing in outbound. Okay? We go around the room. Sam, who are what are your top three ideas? Okay, Harry, what are your top three ideas? We go to each person. Everybody comes with three like contrarian or different ideas on how to do outbound. We discuss them all, we select the ones that we think are the best, and we go out and we try them. And you do this with outbound, you do this with events. I remember the first time we sponsored SaaStr at Brex. We had late-night whiteboard session. We get everybody that that we think is, you know, contributing to this meeting in a room.

58:04 Everybody come up with three ideas. What are the things you want to do differently? We we don't just show up to SaaStr with a $100,000 booth and some pins to give away to people. We show up, we had TaskRabbits outside of the event in Brex t-shirts handing out Brexfast burritos to every single person that walked in the venue. So, the first experience that they have at SaaStr is they get a Brex burrito on when they walk in. Four bucks a person. So, like not not expensive. They walk in, they know our booth, we have a magician that is using like, you know, Brex cards to do tricks. they we're giving away $25 gift cards. He's incorporating the Brex pitch into his magic tricks. Everybody is around our booth for these $25 gift cards. We had all the billboards that were around the SaaStr conference. We bought all the paper walls. So, on the walk from the hotel to the conference, you're seeing Brex billboards. When you check into your hotel, your key is a Brex credit card.

59:10 When when the hotel gives you your key, it's a Brex you use your key like four times a day to go in and out of your room and you're How do you do that? You do a partnership with the Four Seasons? Like, what how is my room key You pay for the sponsorship. and we you know, we actually brought this idea to SaaStr. And SaaStr was like, that's free money for us. And we didn't even have the sponsorship before. Yes, we we we have these room blocks. We didn't tell the hotel like use these key cards.

59:35 We ordered the key cards. That's small. I like that. The key cards is really good. And none of this stuff Again, you do this with every channel. I'm actually I'll give you one more example because I think you know, Harry you seem to like the like like outputs of some of this stuff. But the way you get there is late night whiteboard session. We're sponsoring Saster. Everybody come with your top three ideas of things that we can do to stand out at the conference. We're doing Outbound. Everybody come with your top three ideas of things that we can do differently than everybody else for Outbound. I'll give you one more. Paid advertising. Actually there's two outputs. So, paid advertising, everybody just pays LinkedIn and Google and Twitter and they pay them a bunch of money to like service some ads. Okay.

60:17 Brex, we went offline. So, everybody's doing online advertising, we put billboards all over San Francisco. We did offline, very contrarian. And we had a concentrated target market geographically. My favorite one though, that was super effective. What Rippling has done, they have a campaign right now where instead of paying LinkedIn money to surface ads on LinkedIn, they they are when new employees onboard to their customers, they onboard through Rippling.

60:51 And at the end of their onboarding process, you know, it's W-4, I-9, payroll, all that stuff. Benefits. At the end of the onboarding process, they do an NPS survey. How would you rate your rate your experience with Rippling? The folks that say nine or 10, they send them an email and it says, "If you post on LinkedIn about your onboarding experience with Rippling, we will give you I don't know if it's 25 or 50, 25 or $50 Visa gift card.

61:18 Just Something like that. And so you have thousands of posts on LinkedIn that are sort of organic, where a new hire at a company is saying, "Just joined company X, onboarded through Rippling, awesome onboarding experience, you know, hashtag Rippling hashtag sponsored." And all of these posts, they get tons of engagement because you see when somebody joins a new a new company, everybody likes it. It's like, you know, I joined this new company, it's an announcement, everybody likes it, congratulations on joining the new company, and they're paying 50 bucks each time somebody does one of these with hundreds of likes in some instances because they joined a new company. How much more effective is that $50 than paying LinkedIn $50 to service an ad that says Rippling all-in-one HR and IT?

62:14 I I totally agree with you there, and it's like that that we we both know brand building. That I'm moving is one of the most high-engagement, valuable posts you will ever do. That I'm moving, new fund, big round is are the ones that get it. Everything in between is nice, but it's activity. Those are your needle movers. And so you're getting it for 50 bucks. So I I totally agree with you there. I've got to ask, what was the most successful paid campaign you did? And what was the oh my god, we just up on that one?

62:51 Okay, so so the most successful campaign, and we'll not be Brex specific, the most successful we did campaign we did at Brex was the billboards. And I think it's the type of thing where, you know, our mind share it within our target buyer went from zero. When when Brex launched in 2018, when I joined Brex, we didn't have a website. I went to the website and it said coming soon. We had no PR, we didn't announce any of our funding rounds. We were in stealth. And so so it was almost impossible for for our target market to know who Brex was. So, you know, market mind share of Brex was like near zero.

63:39 And when we launched, we did a bunch of things including announcing that the fundraising that we had done historically. Of course, we launched a marketing site the very day that we launched in GA the product. We put billboards up all over San Francisco. And I think the campaign cost something like $300,000 over 3 months. But we were we were everywhere. And that just made everything easier for us.

64:10 You know, we talked about outbounding. I can't tell you the number of because it was in the hundreds. The number of responses to our outbound emails that were I see your billboards everywhere. And they they just like they probably don't respond to the email in the first place if they don't see our billboards everywhere. So, one, customer acquisition became so much easier because of the brand awareness from that campaign. But here it was bigger than that. Like in fundraising became easier because of that campaign. We we sort of became famous because of this billboard campaign that we were all over San Francisco. And so for you know, $300,000 it was really effective. I understand that for many tech startups, they can't spend $300,000 on a billboard campaign at an early stage. We were well funded at the time, which not not everyone is. Okay, so we have thought is the best.

65:13 What was the Oh my god, I can't believe we did that. Brex is a corporate card, a credit card. And if you think about you know, American Express was our biggest competitor when we first launched. We were mostly taking market share from American Express. Folks had used their business or corporate card. And American Express is really famous for airport lounges. You know, they've got these like Centurion lounges at a bunch of airports.

65:46 And around the same time, Capital One was launching these like Capital One cafes, and we decided at a very early stage. We were less than 100 employees. We decided that we were going to open a restaurant and lounge. And so we opened a in South Park in San Francisco. We opened a Brex lounge on top of South Park Cafe, which was a restaurant.

66:20 And Harry running a restaurant is hard. And it's also expensive. And it it is distracting. And you know, in hindsight, that was a big mistake. We should have focused on what was working, building a credit card company, using our dollars to acquire things like customers, and not, you know, remodeling a 100-year-old restaurant that was in dire need of a remodel.

66:58 How much did it cost? Oh, I I don't know the exact number. All in, you know, look, I think there's there's two costs. There's the hard costs, which hundreds of thousands, if not low millions of dollars, you know, when all is said and done in terms of remodeling the restaurant, the rent, the it just everything that goes into it. But Harry, it's it's the opportunity cost that was so much higher. It is hard to run a restaurant. It takes resources from whoever we put in charge of running the restaurant, they have to hire people, they have to manage those people.

67:37 It was that was the biggest mistake that we made at at Brix. Yeah, that was a idea. That was a world-class idea. If you were in the if you were in some of the exact meetings where we discussed it, you might have been like, this is going to be great, but it wasn't. No, no, no, no, cuz it's not it's like it's just in South Park. Like it's not like IMAX lounges around the world with a network effect and a brand effect. I mean, like this feels like if I was the founder, I'd do it just to have a good place to have lunch.

68:10 Here's maybe the glass is half-full way of thinking about this. It's something like not 100% of your really creative or crazy ideas are going to land. And I think it's better to have tried than not tried at all, something like that. But you know, so maybe even like celebrate the failures in a way. If you think about the contrarian winnings, I totally agree with you and I would way rather try and have some out there stuff that fails than doesn't. I think you should want to cap the losses hopefully in the not millions.

68:46 I want to move into a quick fire Sam. So I'm going to pepper you with questions. 60 seconds per one. Does that sound okay? I love it. Okay, discounting. Do we ever do it? Do we not do it? What what's the advice? Yes, with qualifications. You know, early stage startup, if I can describe the environment that I prefer to be in, it's something like we are perceived as the premium product both because of the quality of our product, but also the price point with which we sell the better product.

69:19 And I have the ability to discount that product to accelerate deal cycles. So much of sales is psychology. And if you're a buyer, you the the feeling of getting a good deal drives behavior. You know, there's a saying here, time kills all deals, especially in the early days. If providing a discount does things like accelerates deal cycles, prevents people from looking at competitors, and allows you to move on to another opportunity, I do like leveraging it in certain instances. I think where people make mistakes, and sales people in particular make mistakes, is like just defaulting to discounting.

70:09 this is something that happens very late in a deal, and it happens with a very clear trade-off, which is driving urgency to close. I I I totally agree with you that. What sales tactic has died a death? What's no more? There are two. We talked about one. this spring and praying of emails, especially at an early stage, I think is something of the past. The second thing that comes to mind is people are going to start meeting their customers in person again.

70:49 You know, pre-2020, a lot of customer interactions happened in person. And then 2020 hit, people went remote, and I think, you know, we have not returned to an environment where we're meeting our customers in person, we're meeting our prospects in person. And I think that today, if you're doing that, it's a real competitive advantage. But I think forward-looking, this idea that we never are going to meet our customers in person, we're just going to return to the norm here.

71:20 we measured conversion rates at Brex when we met a customer in person, we had 3x the likelihood of closing that deal than if we didn't. And so like the days of working from home, doing zooms only to meet with customers, not meeting customers and developing personal relationships, those days I I think are going to be a thing of the past if not already. Do you buy remote sales teams? If you are a mature business and you've gone remote, I think it's that's that's a tough tough to put that back in the bottle.

71:52 The genie's out. I think if you were starting a business today, I am very biased towards building in person. both the you know, the entire company, but also the the sales organization. I totally agree with you. I I I found in person companies. What would you most like to change about the world of sales moving forwards? My experience with many sales people today, and you know, we've talked a little bit about this remote environment that I think has had influence.

72:27 But I think today's sales people have gotten a little bit lazy. And I think they and we, cuz I consider myself, you know, part of this community, couple of things have happened. One, we have become overly dependent on marketing, SDR, anybody to source our own leads. We we are we are consumers of demand, and if we're not well-fed, then you can't expect us to close revenue.

73:04 So, that's I think one one like trend that I believe needs to change. And the second one it it it it is around effort. and especially with remote companies, and I think that this is true with sales, and it's likely true beyond sales, where, you know, Harry, when I joined Brex in 2018, and we did this podcast, startups were really hard. And my first day at Brex, I had a meeting that was at 8:00 a.m., and I had a meeting that was our executive our weekly exec team meeting, and it started at 8:00 p.m. and didn't end until midnight. And I walked home from the office after midnight, and I was in meetings from 8:00 a.m. until midnight.

73:53 Same thing was true at Zenefits. It's it's just it And look, I was an executive employee there, but you know, I think all of the people at the company were working that hard. And it required it. And I think today many sales people in a remote environment are waiting for leads to be placed on their calendar and working something like a 30-hour work week. And it just doesn't really work, especially for early-stage startups. Like if if you want to separate and be successful, it just requires a lot of hard work and and no entitlement around, you know, getting leads placed a warm, spoon-fed leads on our calendar.

74:42 That's the greatest opportunity of all to me for young people, cuz I I sound so old saying young people. Like yeah, I've been doing this 10 years and a lot of people coming out of university ask me what do you advise? I always say it's so easy to be different because everyone else is so mediocre. If I actually just do those little things to you Sam, I write that thank you email to you post the first day highlighting the couple of things that I thought were interesting from that first day that maybe we could do better. You're like Mhm.

75:11 That was That was good. Good start. Perceptive. Little things that don't take much. Really don't take much. But it's so easy to be great cuz everyone's quite mediocre, I think. I think it's really insightful and smart. and there are so many of these things, you know, you talked about they just apply beyond what we're what we're describing here and here but like the little things can go a long way. Sam, I've loved this. Thank you so much for putting up with my sometimes impassioned rants and opinions.

75:40 you've been fantastic and I hope we don't have to wait another 6 years to do this again. Harry, I I appreciate the invite so much. I've had a blast as I always do and let's hang out in person. I'll be in London early June and I expect to see you and and spend some time together then.