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Sellerant Issue #3 — Selling From The Top

Lantern Newsletter
Lantern Newsletter
My name is David and I’m the founder of Lantern. This week’s newsletter features an exclusive interview with Chris Bakke, a founder and operator with 3 exits to Indeed, Zillow, Knotel.
This interview was edited for length and clarity.

Chris Bakke
Chris Bakke
What do you know now that you wish you knew when you started your company?
I think the biggest thing is to play long term games with long term people. This is a frequently quoted idea in VC and startups today, but I don’t think it was as obvious to me when I first started out 10 years ago. 
I think that this can take a lot of different forms. Typically, the two places where it’s going to matter the most will be the people in your early team (co-founder and first 20 people) and your investors. 
Many times, I’ve been in scenarios where people’s skills seem like a fit but they don’t quite click with my team. It’s tempting to only consider their skills and think that you can make the personalities click or the culture work. 
However, this is ultimately a mistake. If you run a company well and it becomes big, it can go for over 10 years. If that person is a bad actor, you have to deal with them for the lifecycle of the company. I think the same idea applies with venture capital. Investors and angels are more than just money; they’re also people that you have to work with.
That’s probably the big lesson as I head into my eleventh year in startups. Before going into business with someone, it’s important to assess not only their skill sets but also how well they get along with you and your team.
The question that I always ask myself is whether this person is someone that I want my name, my team’s names’, and my company’s name to be associated with for the next decade plus, because that’s the reality of startups.
How did you get your first 100 customers?
It was a grind. For context Interviewed was selling assessments and recruiting solutions to enterprises (large insurance companies, tech companies, outsourcing companies, etc), some mid market and a handful of SMB customers. 
I got the first $2 million in revenue myself before we ever hired a salesperson, and that was critical. I think that as the founder of a company, getting your first hundred customers is one of the most important things you can do. I don’t know many-if any- successful people that outsource this piece. It’s kind of like building a team. You want to be super hands on with hiring, customer development, and finding product market fit. 
We had a broad approach at Interviewed, which I think is extremely important. Most founders pigeonhole their idea way too early. This can take a lot of different forms; you can pigeonhole yourself on price, geography, industry, and target customer. 
One question to ask for a B2B product is who will be purchasing it. In our space (recruiting), we ask: is a CFO, a hiring manager, or a head of recruiting more likely to buy the product? My thesis was that we don’t have the answer, so we’re just going to try to appeal to as broad of an audience as possible.
For the first two years of our company, every business day I would pick one to five companies to cold email. I would scrape emails from LinkedIn and email 20 to 30 people within each company. My goal was always 20 cold emails a day and in a lot of cases it was more like 80 cold emails per day.
If you work at a large company, you need some signals. If somebody asks, “Hey, have you guys heard about Sellerant? Have you heard about this guy David?” The last thing you want is for everybody in the company to say no. So a lot of times what would happen is, I would pick one company, I would send a minimum of 20, probably a maximum of 80 emails, all semi or fully customized, and I would send them to almost everybody in the C suite (CEO, COO, CFO, or chief HR officer). I’d also email any VP that I thought was relevant and as many recruiters and HR people as I could find.
 And what you would say is something like this:
Hi X,
My name is Chris and I’m the founder of Interviewed. We have a super exciting way for companies to assess the skills of people who are applying to their jobs. Can I show you a demo? 
In many cases, especially for our first hundred customers, the response would be, “I don’t know, I’ve never heard of you. But it’s weird. My VP forwarded me the same email.” And so you hit these companies from every possible angle and people forward the emails and say, “Have you heard of these guys? Maybe we should talk to them.”
Our conversion funnel from those cold emails was to then get people on a demo. In general, we would do as many demos as it took. Our first 10 customers paid us between $300 and $500 per month. As we closed in on 100 customers, we had customers paying us $30,000 for the same product for the same platform- it was just a much bigger use case. 
When we looked back across our first hundred customers, we found something crazy. When we looked across our first hundred contracts, or first hundred customers, we found that we sold to recruiters, VPs and C Suite executives. If we had pigeonholed too early and said, “we’re a recruiting tool, and we’re only going to target recruiters,” we would have missed out on a ton of potential buyers and eliminated the opportunities we had with CEOs, CFOs and VPs of engineering and sales. 
So our early process was just taking it one day at a time. We’d get contact info from LinkedIn and cold email a ton of people in the company. Then we’d move on to the next company the next day, and while we were doing that just try to get really good at demoing. That was how we got our first hundred customers and grew to ~$2M in ARR. 
What is the biggest risk you have ever taken?
My biggest risk will be starting my next company. I’m in an executive role at a publicly traded company (Indeed). I’m giving up a lot of compensation and other benefits to go make zero dollars again. 
Before I started Interviewed, I was the COO at a well funded Series B company. It was a big leap of faith to go off and become a founder, and I’m glad that I did it. I’m very excited to be doing it again.
What has been your biggest mistake?
My biggest mistake has been hiring executives too early. This speaks to off loading responsibilities. Some people are really good at this. They naturally think about how to build a machine and are very hands off from day one. 
If you’re building the machine and you are the machine, then you’re the one sending all the cold emails, doing all the recruiting, raising all the capital, writing all the code, whatever it is. This can be very hard. I don’t actually think it matters whether you’re a perfectionist or you’re super hands off. If you’re running that machine, it’s very hard to take some of the things that you’re doing and hand them off to people.
This mistake is very expensive. In a seed stage company, if you find an awesome VP (engineering, sales, etc), you’re going to have to give them a significant piece of the company (anywhere from 0.5%-5%) in addition to paying them a crazy salary to convince them to leave their previous job. 
In a lot of cases, I brought on senior and expensive people to do stuff that I was tired of doing. It wasn’t because I was ready to hand it off or because I should have handed it off. It was just because of feeling, for example, that I would love to have a VP of Sales sending cold emails for me so that I wouldn’t have to. 
And it goes back to my earlier point: startups are a grind. You’re gonna have to do a bunch of stuff that kind of sucks for a very long time. But it’s way better if you do it yourself for as long as you can. 
At Interviewed, our founding team wrote down a principle: Don’t hire until we’re bleeding. 
This principle extends beyond startups. I still use it to manage my team at Indeed, a company which is doing billions in revenue each year. I think it’s a principle that works at a two person startup and at a 12,000 person company like Indeed. Adding more people early on, especially more senior people, does not always fix all of your problems.
So that’s been a mistake I’ve made, where I’ve brought on senior people too early and expected that they’d know how to scale. There’s not a lot of information out there about how to do these handoffs or when to bring people on, and it varies from company to company. But I think that that’s been something that I’ve certainly learned the hard way many times.
What do you think the future of software is?
Although there are outliers, in our entire lifetime software has been built for buyers and not for users. If you look at the offerings that Oracle, IBM, and some of these large software companies provide, there’s something for everyone. The reason that there’s something for everyone is that they’re trying to pigeonhole one product and make it as vague and as wide spreading as possible. 
Oracle’s only hurdle is to sell software that somebody will buy. They don’t actually care about the user, because they are locked into a 15 year contract. Their goal is to sell to every company, but the software’s not specifically adapted to the needs of each company.
I think that designing and selling software to individual users, and then having a bottom-up consolidated approach is very compelling. It has been done very well in the last five or 10 years by companies like Slack, where you and I can just go buy an individual slack license. We don’t need permission, we can use it for free, and then eventually if things go well, we can consolidate up. Services like Dropbox and Google Docs are like this too. There’s a bunch of these companies, but there’s still way more companies that are selling to buyers versus users. I think in the future we’ll see a giant shift in this approach. 
The other thing is that I think there will be a general lack of innovation over the next 10 or 20 years, but I think that that’s actually okay. I think what people are starting to realize, especially bootstrapped founders and founders that take small amounts of capital, is that you can take a piece of software or an offering, just tweak a couple things (price, distribution model, a feature, or even language), and sell that product. 
I think when we look back in 20 years, we’ll think, holy cow, the world is wildly different than it was. But in contrast to these groundbreaking releases, it’s possible to make a ton of money and create a ton of value by taking things that already exist and tweaking them to make them 10% better. This creates far more value than just a 10% improvement. So I think that the two biggest themes in software over the next decade or two will be bottom up adoption and small, iterative tweaks.
It’s hard to scale companies. Don’t hire until you’re bleeding, be relentless with sales, and once a customer signs a contract, make sure that they don’t cancel their subscription.
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Lantern Newsletter
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