Category: People

My personal experience and more recently working with Fresco Capital’s startups has taught me that no matter how different each business and start-up process might be, nearly all new co-founders and CEOs eventually pose the same important, inevitable question: When do I hire a VP of Sales?

My response is always the same: When you really need one.

So, what does that mean?

Co-Founder and CEO Talent and Time Management

Most co-founders and early CEO’s prefer to focus their talent and energy on conceiving and building the new enterprise. The most successful CEOs come from backgrounds in finance and operations. Only 20% of Fortune 500 CEOs started out in Sales or Marketing.

Yet many company leaders also necessarily take on the crucial task of generating those early sales. While a CEO may excel at creating connections and relationships, few are sales experts and are typically overwhelmed with the task’s time commitment. So, during start-up and initial operations, when CEOs think in terms of building the company by building a stellar leadership team, they want to pass on those vital sales responsibilities as quickly as possible to a proven sales expert. After all, a good leader should hire other good leaders, right?

Not yet.

This Is Not The Time to Buy The Rolex

Although a new CEO and leadership team typically want to hire a proven VP of Sales from a very successful company, making a “Rolex” hire early in the company development — and paying Rolex prices for the talent — is not the answer. In fact, poaching an expert VP of Sales by offering a sizeable opportunity and compensation package is counterproductive.

Here’s why.

An extremely successful VP of Sales has become successful because they effectively manage a sales force. A new VP will want to replicate that success by building their new sales team and developing a sales process, complete with expensive sales automation tools. In the long term that is exactly what your company needs. In the short term, however, that is a potentially dangerous waste of resources for your new company during a crucial period. (Yes, I am saying that Google Sheets is a perfectly good CRM at this stage.)

While the VP of sales is putting together a team and developing long-term strategies, nobody is focusing on making actual sales. Lots of money going out, none coming in. The results can be disastrous. The VP of Sales and the team are either fired, quit, or the company runs out of money.

Build Your Sales Team from the Bottom Up

There is a much better option. Build your sales team from the bottom up.

It may feel counter-intuitive, but the bottom up process is more logical and practical for new companies. It makes much more sense to hire a junior salesperson – someone who will one day report to the VP you eventually hire.

The junior salesperson is expected to be out there making contacts and making sales, which is – at this point in time – what the company needs. Look for someone in the industry with knowledge and experience, demonstrated success, and capacity to learn.

I know that the CEO is eager to offload the sales process, but recognize you will need to spend time mentoring your new hire, and plan to give them at only 25% of the labor the first month or two. Don’t expect them to do all your sales work — understand that the CEO may still want — or need – to close these early, important deals and the new hire will only shadow the CEO for the first few weeks, growing into the role.

The point is that a co-Founder or CEO should be doing primarily what the CEO alone can do — especially in sales.

After the salesperson starts to take over more and more responsibility and sales start increasing, hire another junior salesperson and start slowly building your team. Most importantly, keep the team focused on generating sales. At this point, allow the team to start building a sales process and choose some tools that fit your environment.

Now You Need A VP of Sales

So, when do you hire the VP of Sales?

The answer is simple: Hire your VP of Sales when you’re generating enough sales for a VP to manage and your process is starting to strain at scale. That’s when you really need one.

That’s when it makes sense to hire a mega-talented VP of Sales with exactly the qualities and skills you need. That’s when you’re ready to recruit a proven, effective leader, someone qualified to create the big vision, continue building a sales force, make the strategic long-range plan, and facilitate the team’s success.

And that’s when you can afford to invest in the best VP of Sales you can find.

In the meanwhile, the “Bottom Up” strategy is a better short-term approach in terms of all primary company resources – money, staff, time- and it leads directly to stronger company success in the long term.

I was recently in an Uber on the way to the airport when I started chatting my driver up. It turned out he had three similar on-demand kind of jobs—none of which were stable, traditional gigs.

This got me thinking: Many of today’s workers, and the younger ones in particular, are more entrepreneurial than their predecessors—despite the fact that they aren’t necessarily bona fide entrepreneurs.

More than 20 years ago, I landed my first real job: a full-time entry-level position on Wall Street at Fidelity Investments. Remember? Young professionals used to be able to get entry-level jobs at good companies and climb the ladder. But today, those jobs simply don’t exist, as many lower positions are outsourced or automated with technology. The economy has changed and new hires are expected to come to the job and start producing on Day 1. Hard to do with only a university degree.

Altogether, these trends have led to a generational bulge of middle-tier jobs. This area of the workforce is now occupied by people who usually would have moved out of those jobs faster, allowing the younger generation to advance sooner. But now they can’t get move upward at all, since folks in the middle tier stay there forever it seems. As a result, more and more people are leaving the lower rungs of traditional employment and are deciding to take part of the gig economy. That way, they’ll get the requisite experience to hit the ground running on Day 1 should they be offered a regular job by an established company.

How Young Workers Get Ahead in the Gig Economy

Want to land a job at Pixar? You’ll probably have to freelance for a while (think: YouTube design videos). Should you perform well in that role, you might get picked up full-time.

Within the next 5 years, many project as much as 50% of the US workforce will be made up of freelancers. This is both a blessing and a curse of the gig economy—especially as it pertains to younger people just entering the workforce. In the past, even those without a career path would fall into a nice profession simply by following the standard track. But today, you need to be more hustle-oriented and driven to reach just the first rung of many corporate ladders.

To be fair, there are exceptions to the rule. The career paths for lawyers and doctors might be the same due to the advanced education and certification required for those professions—and the free market probably won’t (and shouldn’t) change that. Nobody really wants a doctor who’s pieced together experience by performing operations on a gig-basis, right?

The Disruption of Venture Capital

While the rise of the gig economy has shaken up traditional career paths, it’s also enabled younger workers to make inroads into previously exclusive industries—like venture capital.

It used to be that, to get into VC, you needed an introduction from a family member or friend to land an internship. After that, you’d become an analyst. Do well there, and you’d earn your VC stripes. Then leave and go to a fancy Business School and go to a new VC fund as an associate. The better the MBA, the better associate job you’d get and so on.

That’s not true any longer.

Nowadays, there are several hundred VC firms. And hiring managers there are looking for entrepreneurs or former founders with operating experience. For example at my fund, Fresco Capital, we have three partners and three associates, and I am the only one with an MBA -and that was by accident! 🙂

What the Gig Economy Means for Young Workers

But remember, thanks in large part to the gig economy, there are other ways to meet that entrepreneurial criterion or grab that operating experience that don’t involve b-school.

Just take a look at Elon Musk’s story. When he started out, the serial entrepreneur had his sights set on working at Google. He waited outside the company’s Mountain View campus hoping to talk to people and was eventually rejected. Of course, we know how Musk’s story has turned out. He’s started a bunch of big-time businesses, which just goes to show that there are very non-traditional ways to cut your teeth nowadays.

At first, the gig economy looks scary. There’s no traditional go-to school to attend to land your dream job. But the gig economy does provide a democratization of talent—work is there, so long as you’re willing to hustle. Graduating seniors should consider the gig economy as a viable means for getting those tougher jobs.

The first step to landing your dream job starts with understanding that the economy is changing. The second step? Realizing you need to work harder and harder to beat out the next person.

What the Gig Economy Means for Employers

If large companies decide to hire kids right out of college simply because of where they went, they’re going to miss out on the best and brightest workers—it’s as simple as that.

More and more young workers are getting their first experience in the freelance economy. If you’re afraid to tap into this pool of talent, it’s only a matter of time before your company will lose all of its competitive advantage.

We’re going through a transitional period in the economy, and the traditional means of getting a job doesn’t apply anymore. The sooner both young professionals and their prospective employers understand this, the better off all parties will be.

Going on a trip to Silicon Valley with your MBA program or government incubator? Don’t fool yourself into thinking that those weeklong Silicon Valley immersion programs are anything other than startup tourism. Spending a week visiting Facebook and Uber and attending talks and events, while interesting and potentially educational, will not teach you what it’s like to build a startup.

Sure, you might make some connections and come closer to figuring out what you really want to do for a living. But if you really want to benefit from a trip to Silicon Valley, you are better off reaching out to one of the several early-stage startups here and asking whether you can intern for a few weeks.

You’ll Understand How Startups Work

While immersion programs are designed to introduce you to the world of startups, they don’t go far enough when it comes to actually shining a light on the intricacies of Silicon Valley. Sure you can see the free food at Twitter, swimming pool at Google, and the hiking trail at Facebook, but that is like visiting Disneyland and thinking it is reality.

By reaching out to a startup instead and interning there, you will develop real relationships and potentially kickstart a career. You will understand how startups work behind the scenes, and you’ll be influenced by their way of doing business. Actual work experience is going to look a lot better on your résumé than spending a week hardly scratching the surface of the startup world.

Think of it like studying abroad. There are two ways to go about it. One is to study at a university where the classes are taught in English, you have no homework, and you can hop around to a bunch of different countries every weekend. You get a broad overview of another culture, but no lasting and profound understanding of it.

On the other hand, you could spend a year in another country, live with a host family, and learn the language. You’ll struggle and it will be challenging, but in the end you’ll have an in-depth understanding of that culture, and how it differs from yours. At the end, you’ll belong to two cultures, rather than just one.

It’s up to you, but I’d take the latter experience over the former any day.

You’ll Gain Unique Insights

When you attend a weeklong immersion program, you’ll get a light taste of what you could expect should you move to Silicon Valley at some point in the future.

But by interning with a company out there — and living and working in the environment itself — you’ll gain unique insights that you can’t get anywhere else. You need to experience them on your own, organically.

How to Find Startups to Work For

You might be wondering how you can actually get hired? Maybe you don’t have startup experience yet. Maybe you’re a developer who wants to work for Google, but you’ve only been coding for a year and you just don’t have the necessary expertise.

Head on over to AngelList, the best place to learn about which companies are hiring out in Silicon Valley. AngelList connects startups with jobseekers interested in working for them. The site provides you a clear view as to what you can expect should you land a gig (e.g., salary and equity is disclosed up front).

The best part? By sending out one application, you can apply to over 40,000 jobs in one fell swoop. Talk about efficiency.

How to Get a Startup to Hire You

Don’t think any startups will take you? Don’t be so hard on yourself.

Pitch attractive would-be employers a short project that utilizes your skills. For example, if you’re a communications major, offer to come in for two weeks to consult and intern with them for free, in exchange for a reference. Most startups don’t have any communications or PR plan, and are happy to take free labor.

Are you a political science major? Offer to come and do an analysis on the effects new policy or the upcoming elections will have on them. Think no startups care about this? Just ask Uber what they think.

If you don’t have any “practical” skills whatsoever? Offer to clean the coffee machines and work your way up.

Maximize Your Trip to Silicon Valley

Those weeklong programs aren’t the worst thing in the world. I’ve even hosted them before at my office in Palo Alto. But the payoff is much higher if you actually immerse yourself in the experience for an extended amount of time.

Remember, if you’re part of one of these programs, your trip doesn’t have to end once a week is up. Stay a little bit longer. You won’t regret it.

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Photo by flickr user christian.rondeau

In the early days of your startup, you might have heard you should have a hacker, a hustler, and a hipster on the founding team. That makes a lot of sense in the initial stages of your company due to the experimental nature of the business. Remember what Steve Blank says: a startup is not a “real” business but rather “an experiment searching for a business model.”

Once you start to move out of the coffee shop and build your initial team, you’ll have to make some careful hiring decisions. I’ve seen founders hiring for new “formal” positions right out of the gate when all they need are operators to validate the business and find product market fit. Instead of finding your next VP of whatever or Chief whatever Officer, you should have no titles until you have paying customers and a product market fit.

I advise all the founding team to call themselves “product” on slide decks and email signature (if you do that sort of thing). Early stage team members should not be going to conferences and don’t need business cards, so the title doesn’t matter.

Here are a few other ways to manage the early stage hiring processes, and run your startup more effectively.

Maintain Equilibrium

Last year, I wrote a piece called “The Holy Trinity of Product Development.” I argued that it’s important to maintain balance in a company. Often, a startup’s first hires (besides the founders), tend to skew either to the technology side (we need 5 developers!), or the marketing side.

Generally, if the founding team is more marketing-minded, they overhire engineers, and vice-versa. Instead, a company should be customer-centric. To achieve this “holy grail,” the company needs both technology and marketing expertise.

Be Well-Rounded

In another article, “Why CTOs Should Know Accounting,” I suggested that CTOs also need to understand the business side of your company. It’s important for all of the high-level employees in a company to be able to converse with the rest of the employees.

Just like the CEO of a company should be able to at least pronounce the word “kanban,” (con-ban not can-ban) and know the difference between Java and JavaScript, a CTO should be relatively familiar with balance sheets, income and cash flow, annual statements, and budgets.

How to Hire

I’d argue that it’s better not to even bother with interviews. Rather, have coffee first. Discuss why they want to work at such an early stage company and review their skills there.

If that goes well, then have the potential employee give a presentation to the entire team. It can be on any topic (Was “The Force Awakens a remake or not?” is a perfect choice), and it gives the team a feel for the candidate’s analytical skills, seriousness about the position, and ability to do something different, while it also provides a unique experience for the candidate.

If the person is successful on their hiring presentation, I’d suggest the “can we have a beer with them” final check. This one’s really complicated – take them out for a beer with the team (or another social engagement if team members don’t drink). Get to know them on a personal level. When companies scale to be over 25 people, it is much harder to do this with the whole company, but each functional area (marketing/sales, tech, backoffice) can do it with their group and a select few members from other functional groups to join.

Avoid Founder Disputes

Early stage companies sometimes have no cash and bring on someone as a “co-founder” with little to no pay. It’s also crucial that you do your best to avoid founder disputes. I wrote a piece on this called “Dynamic Founder Agreements,” but I’ll give you a short summary. I described this agreement like a typical IF/THEN/ELSE.

IF:

The CTO works full-time and performs all of coding and technical duties of V1, his equity is 50% vested over 4 years, 1 year cliff.

ELSEIF:

The CTO works part time, is disengaged, or we need to hire developers sooner than expected, his vested equity is reduced by half and he forfeits his unvested equity. Loses board seat.

ENDIF:

The CTO has to leave the company because he needs a job or a family emergency: if the CTO built V1 then the buyout is a one time payout of $50,000 USD cash or 2% vested equity, if the CTO did not build V1, the buyout is 0.5% vested equity. Loses board seat.

While you might not avoid all disputes, this agreement will go a long way.

Hiring for Bigger Companies

Once your company grows and matures, deliberately hire slow. “Scale” and “move fast” does not mean “hire crazy fast.” Rather, hire for a role only when it is obvious the company is suffering without it.

There is a Silicon Valley secret that dictates that “you make a decision to join a company ONLY if they are resource-constrained. Once they have enough people, time to move on.” The idea behind this secret is that creativity needs constraints. Translation: if your plan calls for ten people, see what you can do with five.

Use these tips when building out your initial team. Don’t fall into the hiring trap.

No one talks about how important it is for your CTO to learn the business side of things. That needs to change. If you’re a co-founder or senior executive at a startup or growth stage company, you need to be more than just an expert in your area. I know that’s asking a lot. Becoming an expert is a massive task. But it’s not enough. Each senior leader needs to be familiar with engineering, marketing, sales, and accounting if you want to maximize your chance for success.

This concept has been popularized for non-technical founders for some time, through efforts like Mayor Bloomberg’s Learn to Code and Business Week’s magnum opus What is Code. But I’ll wager if you’re a CEO, you suck at social media. You probably don’t understand it, even though it’s the future of customer engagement. That needs to change. And this change needs to extend beyond giving non-technical founders technical skills. We need to help CTOs get business savvy.

Perform a Self Assessment

If you had to take over any of your company’s functional roles (marketing, sales, etc.) for a short period, would you be able to lead effectively? If the answer’s yes, great. Proceed. But if not, you’ve identified a major need.

Things happen, and you need to prepare for contingencies. Not only that, how can you screen and hire the right person if you can’t speak the same language?

Non-technical CEO’s should code so they can:

• Understand how the sausage gets made
• Talk to their team with the right vocabulary (i.e. Agile, Scrum, and Kanban)

If you’re the CTO, don’t you want to be relevant in business meetings? You won’t be as strong in marketing as your CMO, but you can add value and influence decisions.

If you outsource business decisions to your non-technical co-founder, there will be consequences. Best case scenario? You disengage from the business side.

Worst case: your disengagement leaves your CEO to feel lonely and stressed. And then one day, you wake up to a phone call from that person saying, “Hey, we’re out of money.”

Don’t let that happen to you.

Jump into the Business Side

I love founding teams comprised of engineers because:

• Less technical risk
• Solve their own problems
• Shared background with me

I’ve been a CTO many times in my career, and I’ve exited multiple companies. But heading back to grab my MBA still made me a better CTO.

I don’t think all developers should get an MBA even though, unlike many of my peers, I think there’s value in one. Instead, I’d suggest creating your self-study MBA.

Design Your Personal MBA

Here are my suggestions for a practical education that will make you a better leader in every functional area.

Accounting

All techies should read The Essentials of Finance and Accounting for Nonfinancial Managers by Edward Fields (who was my Accounting professor in business school).

It’s not exactly A Song of Ice and Fire, but you shouldn’t want to put this book down. You’ll get familiar with:

• Balance sheets
• Income statements
• Cash flow statements
• Budgets and forecasts
• Annual statements

I know. It’s dry. But the book is so necessary.

If you want to supplement it, take an online accounting and finance crash-course like this one at Udemy.

Marketing

Al Ries and Jack Trout wrote The 22 Immutable Laws of Marketing. The book was published over two decades ago, but it’s still essential. Learn from real world case-studies.

And remember this lesson: if people don’t read your website or emails, they’ll never buy your stuff.

To improve your copywriting, try the great Gary Halbert’s Boron Letters.

Sales

Sales makes the world go round. Here are two great books:

• He may have been a little corny, but Zig Ziglar’s Secrets of Closing the Sale is excellent. He knows objection handling better than most.
• Then there’s The Little Red Book of Sales. It’s short, sweet, and to the point. It’s a great reference book.

And finally, for our non-developer friends who’ve stuck through this:

Engineering

Read the Bloomberg article What Is Code that I mentioned before. It’s an interactive history lesson that walks through everything developer and even delves a little into philosophy.

At the very least, you should get familiar with HTML & CSS so you don’t need to bother your developers on trivial tasks. Brush up over at Codecademy.

You’re never going to be an expert in all of these roles. But at a minimum, you need to be conversational.

Have a bias for action and carve some time out for learning. Let me know how it goes.

* Image by Flickr user foam

I recently recommended a friend for a PM job at a hot Silicon Valley startup run by another friend. The startup recently raised a big Series A and was looking to scale. I know the risk of linking up two friends in an employment scenario, however, my friend was more than qualified for this job and my founder friend really needed the position filled.

While my friend was more than qualified, interviewed well, and the team loved him, etc, the founder decided to pass on my friend. The reason: another candidate with the same skills and experience came along that they hired. The difference between the hired candidate and my friend? The candidate that was hired had the same PM experience but all at big companies like Facebook, Amazon, and Google. My friend has spend his entire career at startups.

My question is: was this the right move? If you had the choice between nearly two identical candidates and one had all their experience at big successful companies and one had their experience at successful startups, isn’t it safe to choose the candidate that worked at the bigger companies?

Put yourself in the founder’s shoes. You just raised a big Series A. You are being pressured by your investors to “go big or go home.” You have aspirations to be a big company. This is Silicon Valley, shouldn’t you hire the absolute best talent we can find? Shouldn’t you hire people who worked at Facebook and Amazon since you want your company to be big like them one day?

PMs that only worked at companies such as Facebook and Amazon are super qualified PMs. Huge plus. They also know next to nothing about building a startup. Huge negative. People from larger companies bring the bigger company process, procedure, and culture with them. This leads to premature scaling of your business. The problem is that your startup is not a smaller version of a bigger company. As Steve Blank says, a startup is an experiment looking for a business model, not a smaller version of a larger company. Facebook as over 10,000 employees and billions in profits. My friend’s company has less than 15 employees and no profits. Hire people comfortable working in that environment, who know how to bring a company from 15 people to 150 people. When your startup has 1000 employees and is super profitable you should start to hire PMs from Facebook. In between, you have to hire people who can not only do the job, but also help you grow the business, shape the culture, and constantly evolve the process.

I made this mistake several times at my past startups. At one startup we realized that we needed an HR manager. Since we had plans to “go big” we wanted to hire an HR manager who came from a big company. Big mistake. We were a team of 12 but all of a sudden we were doing 360 reviews and had to fill out a form in order to take a day off. At another startup we wanted to enter the “enterprise” space, so we hired some “enterprise” software people from a large enterprise software company and gave them fancy titles. The problem is that people who work as executives at big companies usually don’t roll up their sleeves and build a product. Nor do they know how to scale a company, they know how to keep a big company big, but don’t know how to build a big company. In addition they wanted to fly business class and have personal assistants, things that did not jive with our startup culture.

Avoid premature scaling at your company and hire not only the candidates with the best skill set, but also with experience in working at and building a startup. Later on when you are bigger and more mature should you hire the people with bigger company experience.

Building a startup is intense and going through the many challenges creates scar tissue. This is not physical scar tissue, it is intangible.

Although it may seem like this would be difficult to identify, it is generally quite clear when someone has this kind of scar tissue. One reason that many investors prefer experienced startup founders is because they typically have scar tissue.

When we started PMA in 2002, the macro environment appeared to be terrible. Everyone was pessimistic and building a startup at the time was definitely a contrarian idea. Nevertheless, our first few months went relatively smoothly.

Then SARS hit Hong Kong. There were real heroes working in the hospitals, putting their lives in danger everyday, and many did not survive. In comparison, we were actually in minimal physical danger. Shops and restaurants became deserted, which was especially noticeable given that the population density of the city is among the highest in the world. In addition to the health issues and the economic impact, Hong Kong went through a massive crisis of confidence, and we were certainly affected. I would like to say that we all had enough foresight to be practically optimistic but that was not the case. We were simply hunkering down to make it through the challenge.

Eventually, we emerged from the crisis, and Hong Kong rebounded. There were many more challenges building PMA, but that experience helped us to become more resilient and eventually the company was acquired in 2006 for over US$200 million.

But the intangible scar tissue never went away. Even writing about it now, the impact is still there. More generally, everyone who was connected to SARS and Hong Kong during that time was affected in some way.

While building a startup is difficult, events like SARS remind us that there are bigger challenges to deal with in life. Many first time founders have already experienced challenges far greater than building a startup. They have intangible scar tissue.