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Early Stage Customers

September 6, 2022
Episode 22
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52:15

Tom and Vivek discuss what the very first customers of a startup must look and act like, the staging and sequencing of setting up a sales operation with a feedback loop to product, and end with special guest Matt Kilmartin, CEO of Habu and former Chief Revenue Officer (CRO) of Krux, for his advice on effective entrepreneurial selling.

super{set} is in the business of solving real-world problems, meaning disentangling actual customer problems - not building a product in a vacuum because it looked cool to us. You can’t wait for every feature of your product to be built before you start having conversations - and testing the market-message fit. As your product launches, early customers are less about maximizing revenue streams (mistakes will be made along the way: customers will fire you) and more about earning valuable product feedback before the scale stage for your company. Metrics like ACV and ARR don’t matter in the earliest stages. What matters is losing the fear of failure to rally the entire company - not just a sales team in a corner - to land those customers and learn from them.

Tom and Vivek chat about how founders must experience the thrill of being in the sales arena, even if they aren’t from a sales background, and how entrepreneurs must show up to those early conversations with high conviction, even if the product isn’t there. They then discuss the staging and sequencing for building out the anthropological customer profile, ensuring a feedback loop to product, and evolving from founder-led sales to standing up a proper BDR function. Finally, special guest Matt Kilmartin, CEO of Habu, joins to give his perspective on operating as a former Chief Revenue Officer and his current role as a founder and CEO scaling a Series B cloud data technology company.

Transcript

Speaker 1: Welcome to The Closed Session, how to get paid in Silicon Valley with your host Tom Chavez and Vivek Vaidya.

Tom Chavez: Welcome, everybody, to episode five, season three of The Closed Session. My name is Tom.

Vivek Vaidya: And I am Vivek.

Tom Chavez: Vivek, here we are again. In the past, we've talked about solution memos and how we create what we call market-message fit. We've talked about co-founder hires. We've talked about the perfectly executed product heist, insertion points and products, product roadmap. Don't you think it's time we talk about customers, finally?

Vivek Vaidya: Yeah. Yeah. Because what's company building without customers, right?

Tom Chavez: You know, those pesky customers.

Vivek Vaidya: Mm-hmm.

Tom Chavez: I read somewhere, if you don't have customers, then maybe the company doesn't actually work out

Vivek Vaidya: Yeah. That's how they screw you. You have to have-

Tom Chavez: That's how they screw you.

Vivek Vaidya: Yep.

Tom Chavez: I hate that.

Vivek Vaidya: You have to find people who can actually catch what you're pitching.

Tom Chavez: Yeah. Yeah. Well, so look, let's take it up. We're going to dive deep today into customers, the early customers versus the later customers. How do you get them? How do you keep them? Which ones do you like? Which ones do you not like as much. And we're going to bring in a special guest. Elvis is on the Zoom.

Vivek Vaidya: Yep.

Tom Chavez: And will join.

Vivek Vaidya: This person is a pro, right?

Tom Chavez: He's a stone cold assassin, knows a lot about customers and revenue and how to do it at this early stage, so we're looking forward to having him join in a minute. Let's build a little suspense, and we'll tell everybody who it is later.

Vivek Vaidya: Yep. We don't have to tell them right now.

Tom Chavez: That's right. Just wait. Just wait a minute. We're going to give it to you a little bit later.

Vivek Vaidya: I've been watching-

Tom Chavez: Everyone's so impatient.

Vivek Vaidya: I've been watching a lot of cooking videos, and sometimes these chefs were like, "I'm going to tell you a special secret ingredient in the recipe, but you have to wait. I'll tell it to you in the end."

Tom Chavez: Well, see, we're copping that move. That's exactly the suspense we're building with our listeners right now.

Vivek Vaidya: Mm-hmm.

The Very First Customers

Tom Chavez: Okay. But early customers. Let's talk about, okay, you've got a product, and by the way, you're not waiting for the product to be finished. You're actually getting things moving. You're having those early exploratory conversations with potential customers.

Vivek Vaidya: And that's hard, right? That's hard for some people to have these conversations in the abstract, without a product that's already been built, because you have to use your words to describe what you're building.

Tom Chavez: And if you show up in those conversations, let's go there, because we see a lot of people get stuck, and you're mealy mouthed about the whole thing, saying, "Hey, well, you know, I'm kind of thinking we're kind of going to sort of have a thing, and it's going to be kind of interesting and kind of cool, but just wait for it, and sorry, we don't have it," well, that's weak cheese. That never works.

Vivek Vaidya: Yep.

Tom Chavez: Right?

Vivek Vaidya: You used two of your favorite phrases these days, weak cheese and mealy mouthed both.

Tom Chavez: Boom.

Vivek Vaidya: Bam.

Tom Chavez: I worked that into almost the same sentence.

Vivek Vaidya: Yeah. Yeah.

Tom Chavez: I'm improving.

Vivek Vaidya: Mm-hmm.

Tom Chavez: So you don't want to show up with weak cheese and just do this kind of dance where you him and ha, and maybe I'll have a thing. You have to plant a stake in the ground.

Vivek Vaidya: Correct.

Tom Chavez: You have to have conviction, as one of my teachers a long, long time ago when I was giving one of my little talks in graduate school, with all my notwithstanding the afore mentioned limiting conditions of the yada yada, he pulls me aside like, "Chavez, if you don't believe this shit, why should anybody else?"

Vivek Vaidya: Correct. Correct.

Tom Chavez: Okay. So you got to show up in those early conversations and make liberal use of what we call a declarative, present tense.

Vivek Vaidya: Yep.

Tom Chavez: You plant the stake. You describe what it is. So you're starting to get... And it's all, I don't want to say. It's make believe, but it's a very kind of airy conversation, right? We're in high air over here where you're, evoking a future, you're describing what's possible, you're describing your product and why and how it adds value for them. Customer acquisition, getting those first... I mean, there are thousands and thousands of people, God bless them, who can get, once you have 20 customers, can get you 200 more.

Vivek Vaidya: Correct.

Tom Chavez: Getting the first customer, the first three customers-

Vivek Vaidya: Is hard.

Tom Chavez: That's crazy hard.

Vivek Vaidya: Yep. I just want to add one thing to your point about putting a stake in the ground and using declarative, present tense. I think there are two things that are important over there. One, even if you don't have a product, you have to be able to explain what it is going to do and how it is going to work, and if there are systems within the customer's apparatus that it needs to integrate with, you have to be able to explain how it's going to integrate with those systems. Right? That's thing one. The second thing is, yes, you should never be mealy mouthed. You never show up with a weak cheese, but you can't also be promising the sun, the moon, and the stars. You have to be able to say like, "We do these things, and no, we don't do these things, and these other things are part of our conception. We haven't gotten to them yet."

Tom Chavez: We had a conversation, you and I, just like that-

Vivek Vaidya: Exactly.

Tom Chavez:... three hours ago-

Vivek Vaidya: Mm-hmm.

Tom Chavez: Right?

Vivek Vaidya: Mm-hmm.

Tom Chavez: ... for a new company. And we show them the demo, here's what it is now. They were interested in a corner point that we don't have.

Vivek Vaidya: Correct.

Tom Chavez: And to your point, we have to just be very clear and plain spoken and say, "We don't have that."

Vivek Vaidya: Correct.

Tom Chavez: "Really great feedback." Right?

Vivek Vaidya: Yep.

Tom Chavez: You start to enroll them by showing that you want them to have their fingerprints on what you're doing.

Vivek Vaidya: Mm-hmm.

Tom Chavez:You invite them to be what we call a co innovator-

Vivek Vaidya: Yep.

Tom Chavez:... at the super mega early stage.

Vivek Vaidya: Yep.

Tom Chavez: Some companies like that. Now, let's talk about that, because there are pioneers-

Vivek Vaidya: Mm-hmm.

Tom Chavez: ... potentially like the customer we're talking to this morning where they say, "Yeah." In fact, we said it on the Zoom. Some people like cool new shit.

Vivek Vaidya: Yeah.

Tom Chavez: If you like cool new, this is cool new... Maybe we should be talking about this cool new together. But a lot of people have this conception of themselves as pioneers-

Vivek Vaidya: But they're not.

Tom Chavez: But they're not.

Vivek Vaidya: And we've seen those many times in the past.

Tom Chavez: No. And it's tough, right? Because all there is is your good judgment.

Vivek Vaidya: Yeah.

Tom Chavez: And you're going to get caught on the rocks, and you're going to get strung out. We've been strung out. I'm thinking of one customer particular, right?

Vivek Vaidya: Mm-hmm. Mm-hmm.

Tom Chavez: Where in our last project, okay, they show up with all this pomp and circumstance and they talk a big game, and then when you get into the guts of an implementation-

Vivek Vaidya: And the first thing that breaks.

Tom Chavez: The first thing that breaks. Wait a minute. Where's the documentation? Give me 25 pages of documentation on this particular... Well, remember we talked about co-innovating. That's all out the window.

Vivek Vaidya: Yep.

Tom Chavez: So the only thing you can do is to qualify it and say it plainly like... And we've learned how to do it, like this morning. They were asking for a pet leopard. We don't have a pet... I can't help you with the pet leopard.

Vivek Vaidya: Mm-hmm.

Tom Chavez: We do have this thing now.

Vivek Vaidya: Yeah.

Tom Chavez: And maybe we can talk about a Siamese cat-

Vivek Vaidya: Yeah.

Tom Chavez: ... later. I don't know. Probably not going to get you a pet leopard ever.

Vivek Vaidya: Ever. Mm-hmm.

Tom Chavez: So that's one aspect of these early conversations. I think the other one is just absolute audacity. Right? Absolute shamelessness in calling anybody you know who might know somebody who knows somebody-

Vivek Vaidya: Yeah.

Tom Chavez: ... who's in your target customer profile. We're going to come back to that. Put a thumbtack in it. We'll come back. But it's just this shameless thing where you just reach out, and I am always proud of, in an earlier project, I just impetuously decide, "You know what? Apple needs what we have. I don't know Steve jobs, but I bet you if I send an email to steve@apple.com, it might-"

Vivek Vaidya: It will reach him.

Tom Chavez: And it didn't bounce. It didn't bounce. And guess what happened? Apple became a customer.

Vivek Vaidya: Yeah.

Tom Chavez: Right? I remember I sent an email to michael@dell.com, and it was weird, because I got a response within about 25 minutes from Michael Dell. I mean, I sent the email. I see it. It's coming back from michael@dell.com. But in a moment, I thought maybe now I got pranked. Michael Dell's not going to respond in 25 minutes to my email.

Vivek Vaidya: An email from Tom Chavez.

Tom Chavez: Right? But that's what happened.

Vivek Vaidya: Yeah.

Tom Chavez: So one big chunk of advice is just be ridiculous. Ask somebody who knows somebody, or just send steve@apple or michaelatdell.com or whatever.

Vivek Vaidya: Yeah.

Tom Chavez: Just get out there-

Vivek Vaidya: Yeah.

Tom Chavez: ... and pedal your wears.

Vivek Vaidya: Yeah. The other thing that I think people get caught up on the rocks of is how are we going to price the product? How much should we charge? Do you think ACB matters at this early, early stage, Tom?

Tom Chavez: It doesn't matter the tiniest bit.

Vivek Vaidya: Mm-hmm.

Tom Chavez: Right? We see so many, and I don't think so much in our studio, because we just... I hope we're just effective in getting people to stop thinking about that stuff. It's not to say that revenue doesn't matter, but when you don't have a customer and you're negotiating the last nickel off the table, or they're trying to claim the last nickel, let's just be clear. The value that they provide is back to co-innovation.

Vivek Vaidya: Mm-hmm.

Tom Chavez: Right? They're going to show up and help you get the kinks out. They're going to make your products stronger, better. Hopefully, it's a smart customer. We're going to... Again, coming back to the profile here in a minute. It's a smart customer who's actually going to make your product stronger. Yeah. They're going to be pesky, and they're going to drive you crazy, right? But the value exchange is so much less about the money-

Vivek Vaidya: Yep.

Tom Chavez: ... and more about the insight, the acumen, the fire testing you get from them.

Vivek Vaidya: And the referenceability.

Tom Chavez: Boom. There you go.

Vivek Vaidya: If you make them successful, and we've seen that so many times in the past, if you make your early customers successful, if you work with them to demonstrate to them that their success is your success, then it pays off in spades down the road.

Tom Chavez: And four out of five times, they're naturally going to want to put it on blast themselves.

Vivek Vaidya: Uh-huh. Uh-huh

Tom Chavez: They're going to want to stand at the top of the mountain top, because let's face it, it redounds to their credit.

Vivek Vaidya: Correct.

Tom Chavez: I mean, they're the ones who were the geniuses who chose you.

Vivek Vaidya: Yep.

Tom Chavez: And now it's working. By the way, a lot of careers for people inside larger companies are made based on the acumen they display in ferreting out new technologies and new companies and using their internal organizational currency to get deals done like that.

Vivek Vaidya: Yeah.

Tom Chavez: We've seen that happen-

Vivek Vaidya: Correct.

Tom Chavez: ... several times.

Vivek Vaidya: Yep.

Tom Chavez: So it's a big win for them. I got to confess. The ones who drive me crazy are the ones where you do end up delivering the sun, the moon, the stars, and the pet leopard, and they still won't go on record. They're rare.

Vivek Vaidya: Yeah.

Tom Chavez: But they happen, right?

Vivek Vaidya: They happen there. Yep.

Tom Chavez: I hate those guys.

Vivek Vaidya: Yeah. Speaking of people you hate... Maybe hate's too strong a word, but sometimes you do have companies that are, on paper, and even in practice to a large degree, innovative companies, but they just punish you with meeting after meeting after meeting after meeting. There you have to be mindful of the brain rape that occurs.

Tom Chavez: Right.

Vivek Vaidya: Because they're just having these meetings so they can extract as much information from you as possible.

Tom Chavez: Amazon used to be famous for that.

Vivek Vaidya: Yeah.

Tom Chavez: By the way. I don't know if they're still doing a lot of it, but back in the day, they were famous for taking companies out and pawing with them for months and months and months.

Vivek Vaidya: Yeah.

Tom Chavez: So yeah, you got to have your antenna up and be aware of what's going on, but we're all around the profile. Let's talk a little bit about the profile of an ideal early customer. We said that they're a natural born innovator, right?

Vivek Vaidya: Innovator. Yep.

Tom Chavez: It's not a hazard. It's a feature for them.

Vivek Vaidya: Mm-hmm.

Tom Chavez: They want the cool new shit.

Vivek Vaidya: Mm-hmm.

Tom Chavez: I think another thing that... I remember Michael Moore had written his book with the bowling pins, where you're in a vertical and the first pin falls, and then the other ones fall behind it. I remember that idea being sort of the bane of my existence 20 years ago, because I think all venture capitalists had read the "Crossing the Chasm" book. Look, I subscribe. Once you have a reference customer in a segment, we've seen this, lemmings follow and bowling pins do fall.

Vivek Vaidya: Mm-hmm.

Tom Chavez: But at that extreme stage zero place, it's less, I think, about optimizing for sector-product dynamics fit. and being much more practical around what I call the anthropological profile.

Vivek Vaidya: Yeah.

Tom Chavez: Right? Is this a person who's going to stake some of their career on what you're doing?

Vivek Vaidya: Yeah.

Tom Chavez: Are they going to give you useful advice? Are they a liar? I mean, can you trust them?

Vivek Vaidya: Yep.

Tom Chavez: Because as you pointed out a minute ago, things are going to fail.

Vivek Vaidya: Fail. Yep.

Tom Chavez: Products are going to wobble. Sometimes the product blows up all together.

Vivek Vaidya: Mm-hmm.

Tom Chavez: Remember once when we brought down the entire website of a top five-

Vivek Vaidya: Mm-hmm. Mm-hmm.

Tom Chavez: ... site? Ooh, that was bad.

Vivek Vaidya: That was bad.

Tom Chavez: So bad things do happen. By the way, I do remember that customer fired us, didn't they?

Vivek Vaidya: They did.

Tom Chavez: Yeah. They fired us. They did. One of our first two? One of our customers' second or third.

Vivek Vaidya: I think it was second one of our customer second, or two or three. I don't remember now, but yeah.

Tom Chavez: So customers are going to fire you, and that's part of the rough and tumble of what we do here. But the anthropological profile, I think, is much more important than the falling of a bowling pin and the sector dynamics and all the kinds of stuff that a McKinsey consultant would tell you about whether or not this is a good match.

Vivek Vaidya: Yeah. I think they also have to be curious. They have to be curious about what you've done and how it relates to their business and what problems it solves for them and everything else. I think this part is sometimes overlooked. You have to connect with them on a human level.

Tom Chavez: Yeah.

Vivek Vaidya: Because you're going to be spending so much time with these early customers that you might as well make it fun, right?

Tom Chavez: Yeah.

Vivek Vaidya: So connecting them on the human level is also very important, according to me. I've had some very good friendships and relationships with these early customers that we have worked with in the past.

Tom Chavez: That's right. It's fun for them. It's good for us. With these kinds of ideas in place, let's imagine now that you've finally locked on one customer or maybe two customers, right? It's a low dollar value contract, but it's a bonafide SAS deal for in what we do. It's an actual contract. Now, strange things start to happen. They start to get persnickety, usually with good reason. By the way, let's also emphasize the founders sold those early deals.

Vivek Vaidya: Yeah.

Tom Chavez: It's not a salesperson. Right? That scares us when see people, "I'm going to hire a salesperson to go and sell." No, no, no, no, no, no. The founders are selling those early deals. Now, when those things start to go awry and things start to slip, we've developed this idea of what we call blueberries and pancakes, where you have a small team, and let's also make sure we underscore, when we say a small team, we mean the company is small.

Vivek Vaidya: Correct.

Tom Chavez: So the whole company is rallying behind the-

Vivek Vaidya: Making-

Tom Chavez: success of a couple of the customers.

Vivek Vaidya: Correct. Correct.

Tom Chavez: Not a product thing or sales thing or a customer services support thing, the whole company. So I've taken to saying, "Listen, I mean, if the customer comes and says, 'Listen, I want you to bring me pancakes with blueberries on the side in the morning on Tuesday at 7:30,' that's what we're going to do."

Vivek Vaidya: Yeah.

Tom Chavez: Wait. And then I remember, because it's happened in the past with somebody, "Well, Tom, what does that have to do with software? They're being unreasonable, and they want this and they want that." Doesn't matter. Whatever the customer... I mean, and this is where people talk about customer centricity. It's happy talk unless and until you're prepared and ready to deliver pancakes-

Vivek Vaidya: Yep.

Tom Chavez: ... and blueberries-

Vivek Vaidya: Yep.

Tom Chavez: ... at 7:30 AM in whatever city they happen to live in.

Vivek Vaidya: Yep. Customer obsession means being really obsessed with making the customer successful. Just like we talk about founders selling, founders are implementing, too. You have to be in the middle of those implementations as founders to know, hey, what's going on? What's working? What's not working? What challenges do we run into? What really worked?

Tom Chavez: Right.

Vivek Vaidya: Right? So you can't do that. You can't get that information secondhand.

Tom Chavez: That's right.

Vivek Vaidya: You have to be there and get it firsthand as you're going through the process.

Tom Chavez: And those customers are looking for evidence-

Vivek Vaidya: Yeah.

Tom Chavez: ... of that maniacal commitment.

Vivek Vaidya: Correct. Correct.

Tom Chavez: They're testing you.

Vivek Vaidya: Correct.

Tom Chavez: And every little moment of truth matters. I remember one of our earlier projects. There was a customer who, as we were assigning, wanted to meet with me in... I remember it was in Atlanta. I fly to the CNN Center in Atlanta. This person comes down from their office. I didn't even meet him in his office. Comes down from his office in Atlanta, and we're in a Starbucks, and he just wants to-

Vivek Vaidya: Shake your hand.

Tom Chavez: ... make sure that we're ready, shake my hand.

Vivek Vaidya: Yeah.

Tom Chavez: And I remember asking afterwards, like, "Okay, really? I thought we were going to negotiate something or have a more meaty conversation." Basically like, "Nope. I just wanted to see that you would be willing to fly out to Atlanta to a Starbucks just to see me and tell me that you want this deal." "Yes, man. I'm here. We're going to do this deal." So it's pre and post and everything in between

Vivek Vaidya: Yeah.

Tom Chavez: Right? It's all the way through.

Vivek Vaidya: Yeah.

Building A Sales Strategy to Scale Revenue

Tom Chavez: Let's talk about who's talking to customers, and I want to just kind of shed a little more light on that earlier thing we said about the whole company. You've overseen huge teams of softer developers and technologists and all the rest. I've said it along the way, the best salesperson I've ever seen is you, right? The way that... And by the way, isn't it funny? Ferris Bueller playing clarinet and he proudly turns to the camera as he's honking away and says, "Never had a single lesson," I feel like that's us.

Vivek Vaidya: Yeah.

Tom Chavez: Never had a single lesson. What is it about those early stage selling cycles that keeps you coming back for more? Because you've gotten really good at it. What do you like about early stage sales like that?

Vivek Vaidya: I think I like the thrill of the game, like the Sherlock said, "The game is afoot, Watson." So it's kind of like that, right? It's like when you are in the arena now, meeting with customers and pitching them, what you've built or what you're going to build, and the thrill of it is very exciting. Seeing the looks on their faces when you can actually convince them that you'll solve their problem is huge. Right? And then, for me, the joy of winning a deal, that's just unmatched. I remember one incident where, in a prior project, we had flown to London. We had a full day of meetings with this customer. They had invited three vendors. After a long selection process, they had whittled them down to three.

Vivek Vaidya: Our meetings went okay. They weren't like... One was not really good. The others were good. So I came back to my hotel room, and I was sitting by myself, and the news came out. Matt called me and he said, "Yep. We made it," And just that thing like I had nobody else with me, so I just looked in the mirror and just shouted to myself, "Yes, we did this! Right?

Tom Chavez: Right.

Vivek Vaidya: So that joy is what I look for. That's why I keep coming back.

Tom Chavez: It is a dopamine-producing, addictive little loop, isn't it?

Vivek Vaidya: Yeah.

Tom Chavez: When you persuade them and then they say yes.

Vivek Vaidya: Yeah.

Tom Chavez: Well, okay, so stage-wise, let's move on now, and imagine we've got three to five customers. You've got the dopamine-producing win from those early key customers. You now have to scale things, but wait, wait, this is the part where people fall into this trough, and they say, "Okay. I got the early wins. Now, I'm going to leap ahead, and I'm going to run the Salesforce playbook, and I'm going to start putting the numbers to it and measuring the LTV to CAC and the pipeline coverage and the yada." Right? All of the metrics we use for stage three we insist on no, no, no, you're not ready.

Vivek Vaidya: Yeah.

Tom Chavez: You're now proceeding, we hope, to stage two, which is this weird kind of in between place.

Vivek Vaidya: Yeah.

Tom Chavez: Right? Because you're sort of carrying yourself like a big boy, but you're still a toddler.

Vivek Vaidya: Yeah.

Tom Chavez: Right? Let's talk about how do we get through that phase? Because one chunk of it, I think, hinges on what people call the ICP, the ideal customer profile.

Vivek Vaidya: Yep.

Tom Chavez: Defining the customer pro... Okay. Now, we're starting to call more, prospects more leads. You're standing up at BDR or SDR function.

Vivek Vaidya: Mm-hmm.

Tom Chavez: You're trying to get some marketing leads through your website or other means. You're going to industry events and so on. So you're trying to define, okay, here's my ideal profile. I find it's important to define that profile and then to also recognize that it's wrong.

Vivek Vaidya: Yeah.

Tom Chavez: Right? It's the Eisenhower, no plan withstands contact with the enemy, but I still find planning super useful. Same thing applies here. Have a clear articulation of who you're going after and why, and then be prepared to revise it-

Vivek Vaidya: Yeah.

Tom Chavez: ... at any moment.

Vivek Vaidya: Yeah. Absolutely. Absolutely. I think the other thing, coming back to your point about people start over indexing on all the metrics and the Salesforce-like process and whatnot, I think in stage two, you have to start setting the sockets up for measuring these things.

Tom Chavez: Right.

Vivek Vaidya: But not be obsessed by them and not let them overtake you, because you will need them in stage three. Right?

Tom Chavez: Mm-hmm.

Vivek Vaidya: And so you don't want to wait to establish the hygiene in stage three. You should do that in stage two, so that when stage three starts, you'll hit the ground running. Right? So you put the frameworking in place, so that allows you to track all these metrics. To your point, when you're starting with BDRs and lead gen and whatnot, let's track all those numbers. Right?

Tom Chavez: That's right.

Vivek Vaidya: But don't be victimized by them in stage two.

Tom Chavez: That's right. So to fix ideas with an example, there's marketing, generated leads. There's SDR, right? What we call outbound. We have people calling. The rate at which we convert those top of funnel leads to pipeline accepted leads, from which segments do they come, partner-led funnel contributions events, so you're measuring the throughput and the contribution from every one of these little sources, and you're trying to really over taxonomize the types of companies and customers that you see, not because you're right. But the point is to generate enough data to have a credible theory-

Vivek Vaidya: Theory. Exactly.

Tom Chavez: ... for stage three. So that's why you measure everything there.

Vivek Vaidya: Mm-hmm.

Tom Chavez: I think it's also important to talk briefly about this kind of fast test and learn cycle.

Vivek Vaidya: Yeah. Yeah.

Tom Chavez: Do you want to say something about what we've seen there around what's the mindset, what are the methods right? For turning the crank as you're trying to scale-

Vivek Vaidya: Yeah.

Tom Chavez: ... that part of the operation.

Vivek Vaidya: Yeah. I think, when you are in stage one, when it's founder-led sales, there isn't that much formalism in, say, "We said this and so we got the customer," right?

Tom Chavez: Right.

Vivek Vaidya: In stage two, again in the spirit of preparing for scale at stage three, you have to put the infrastructure in place and the frameworks in place that allow you to test the various kinds of messaging that will result in marketing leads turning into sales, accepted into pipeline leads, et cetera. Right?

Tom Chavez: Right.

Vivek Vaidya: So send out an email. The BDR sent out an email with this kind of content. Did A work or B work? Right? So that iteration and testing becomes really important all over the place.

Tom Chavez: That's right.

Vivek Vaidya: Whether it's on your website, whether it's in the email you sent, in the decks you use to make presentation to customers-

Tom Chavez: That's right.

Vivek Vaidya: ... all over the place.

Tom Chavez: In a prior podcast, we call that market-message fit.

Vivek Vaidya: Message fit. Yeah.

Tom Chavez: Right? So everyone obsesses with product market fit, as we should, but we've also learned, particularly when you're selling, you say a specific thing, here's a turn of phrase, there's a value point, there's an expression of a pain with a particular tonality and just as you're saying with AB experimentation, this is all data-driven. I said this. I got these many meetings-

Vivek Vaidya: Correct.

Tom Chavez: ... found these kinds of customers within this period of time.

Vivek Vaidya: Correct.

Tom Chavez: Right? That's how you parameterize success. And that's how you know, you're moving from first to second stage.

Vivek Vaidya: Second stage.

Tom Chavez: Right?

Vivek Vaidya: Yeah.

Tom Chavez: There's no one-size-fits-all. There's no Uber answer.

Vivek Vaidya: Mm-hmm.

Tom Chavez: It's a set of habits in the way that you're able to latch onto a no. These particular value points, these expressions of pain, these references from those early customers-

Vivek Vaidya: Correct.

Tom Chavez: ... are what's resonating with the ones who were behind them and are likely to follow. So it's this very kind of complicated dance.

Vivek Vaidya: Yeah.

Tom Chavez: And it's tied to market messages. It's tied to the product. To your earlier point, it's tied to relationships.

Vivek Vaidya: Relationships. Yep.

Tom Chavez: And the profile of the people that you're finding who are susceptible to your pitch.

Vivek Vaidya: Yeah.

Tom Chavez: When something goes wrong and we see-

Vivek Vaidya: Because it will.

Tom Chavez: No. Our stuff never goes wrong. It's always flawless and perfect. When stuff goes wrong, how do you respond? What's the mindset? What are the ways in which you pick up the pieces? The product fails. The customer gets pissed. The customer fires you. We talked about what's the... How do you react to [inaudible]

Vivek Vaidya: Well, let's take those one by one, right? When you say the product fails, the product can fail in multiple ways. Right? First, you're in the implementation, and you made some assumptions when you built the product, and those assumptions are not valid, because the customer situation is... or infrastructure, ecosystem, whatever... is different from what you had assumed.

Tom Chavez: Mm-hmm.

Vivek Vaidya: So now, what do you do? You're back to customer obsession.

Tom Chavez: Yep.

Vivek Vaidya: You work with the customer to figure out how you can adapt your product to work within their environment, so the product fails very specifically, but because you're customer obsessed, you turn around and you fix it quickly for the customer. This is where, back to our anthropological profile of the customer, that comes in, too. The customer has to be of that mindset as well. At the first sight of breakage, if the customer decides to fire you, well, okay. Now, sometimes that does happen, because the failure of the product... This the second type of failure. The failure is sometimes catastrophic.

Tom Chavez: Mm-hmm.

Vivek Vaidya: Right? You gave the example of, yeah, we brought the website down for several hours for certain browsers and whatnot. Yeah. That was bad. That shouldn't have happened. And our sponsor, the customer, had egg on face.

Tom Chavez: That's right.

Vivek Vaidya: And so they had no choice.

Tom Chavez: That's fatal.

Vivek Vaidya: That's fatal.

Tom Chavez: Right.

Vivek Vaidya: Right?

Tom Chavez: But I appreciate your managing the distinction between different types of product failures and things that are frequently presented as product failure that are really just customer process, relationship management failures. Right? We've had moments where a customer makes a move, because we're just not courteously persisting.

Vivek Vaidya: Correct.

Tom Chavez: They hired somebody else, or they go with another vendor for something that should have been part of our upsell.

Vivek Vaidya: Yeah.

Tom Chavez: Because we're just kind of loyally bolting and screwing what they bought into place, but without attending to all of their broader solution needs.

Vivek Vaidya: Yeah. But the other thing you asked was how do you pick up the pieces?

Tom Chavez: Mm-hmm.

Vivek Vaidya: Throughout the life cycle of your company building journey, your attitude and your mindset always has to be one of what do I learn from this? So yes, that customer firing us was bad. Right? But we learned some things from that. It didn't happen again.

Tom Chavez: It sure didn't.

Vivek Vaidya: Because we put in the pieces on the product side, on the testing side, on the deployment side to make sure that we catch whatever issue had had occurred, and that issue or problems did not happen again in the future.

Tom Chavez: It's a kind of a macabre thing to say, but you'll almost need those near extinction level events to focus everyone's attention-

Vivek Vaidya: Yeah.

Tom Chavez: ... on what needs to happen. And it sounds like I'm just trying to attach a silver lining to something that is actually just a big, gigantic turd, but those are the campfire stories that are told later.

Vivek Vaidya: Yeah.

Tom Chavez: Right? Those are the company building moments that really rally everybody to the cause and get them focused on the things that need to happen. It's quite-

Vivek Vaidya: Pain is instructive.

Tom Chavez: As Benjamin Franklin said.

Vivek Vaidya: Right.

Tom Chavez: Indeed.

Vivek Vaidya: Yeah.

Special Guest: Matt Kilmartin of Habu

Tom Chavez: Okay. Well, listen, I think it's time for us to bring in-

Vivek Vaidya: Our guest.

Tom Chavez:... our super awesome double [inaudible] guest. Should we do that?

Vivek Vaidya: Let's do it.

Tom Chavez: Vivek, you want to unveil him he's a big star.

Vivek Vaidya: He's a huge star. He's a co-founder and CEO of one of our portfolio companies. Please, welcome Matt Kilmartin.

Matt Kilmartin: Hey, guys, thanks for having me on. Excited to be here.

Tom Chavez: Through the magic of Zoom, and we're bouncing signals through proxy servers and Belarus and all across the planet, and here you are, but you're not here, but it's as if you were here on the Zoom while we're in the studio. I'm from Albuquerque, Matt. This stuff dazzles and confuses me.

Vivek Vaidya: He's from Albuquerque, and what he didn't say was, which he also says for our listeners, he's from Albuquerque and he rode the short bus to school.

Tom Chavez: Thank you for that.

Vivek Vaidya: So you should complete-

Tom Chavez: No, you're absolutely right.

Vivek Vaidya: Yeah.

Tom Chavez: See, Vivek, you look up in the sky, and you see an airplane.

Vivek Vaidya: Mm-hmm.

Tom Chavez: I look up and I see a giant iron bird. Totally different.

Vivek Vaidya:I know. Perspective.

Tom Chavez: So Matt, in addition to being the CEO of Habu, a very successful, super sick company, was formally the CRO of a prior company called Krux, and Matt, use your earmuffs, because I don't want you to get a big head and I don't want you to listen to the podcast later when we say it, but arguably, the most entrepreneurial sales leader we've ever had a chance to work with.

Vivek Vaidya: Yep.

Tom Chavez: And that's real, dog. So that's why we want to have you here with us today to talk about this customer revenue process that you're setting up in an early, early stage of a company. By the way, we should also note that Matt took us from 1 million to a 100 million in that last project, so there's there's no... And that breaks all the rules of venture capital, because usually, you have these pesky VCs sitting in a room saying, "Okay, well, so and so is our our one to five person, and so and so is our 5 to 15 or 5 to 20 and then 20 to 50," and so on, Matt proved them all wrong and went from one to 100. So Matt, it's awesome to get your perspective on these topics. We're kicking around sort of the complexities of early stage selling. If you would, let's go all the way back then.

Matt Kilmartin: Sure.

Tom Chavez: Well, many years ago, but then you've also had a similar experience in the last couple of years at Habu.

Matt Kilmartin: Yep.

Tom Chavez: Tell us a little bit about the mindset of an early sales leader. Right? And how does it change-

Matt Kilmartin: Yeah.

Tom Chavez: ... according to those stages that I mentioned?

Matt Kilmartin: Yeah. That's funny. Back when I joined Krux, I guess we were two customers, so we at least had a product and had a couple customers, and then we were still seven million, and at Habu, we were sort of pre-revenue. It's a little bit different, but I'd say the mindset is very similar, where it's really about meeting people where they are, and it's not about the numbers. It's really about trying to just establish value with your product. Right? And there's a lot of nos along the way, right? A lot more nos than yeses. Really, in those early stages when you're trying to figure it out and you don't really know, you can really feel stupid on some of those early sales calls. Right? Because you're putting yourself out there, but you kind of know there's something there. So it takes a perseverance grit, tenacity, and really just the resolve to keep on keeping on. Right?

Matt Kilmartin: I know earlier you guys talked a little bit about the profile that the mindset of a buyer early on and someone who's a partner and a co-innovator, and you want to sort of try to identify those things, but it really is just the willingness to roll up your sleeves. In the early stages, it's not about the playbook yet, right? There's no plays to be written. It's about getting your dirt under your fingernails, doing it yourself, and putting yourself out there, and getting those early wins, and really start to get validation. I think one of the things, I think... I think then, as you start to get product market fit and as you move to validation and pre-scale and scale, I think there's all sort of different phases and different moves along the way. I think that underdog mentality has to stay with you sort of all the way through, because you're trying to do something impossible, and it requires some different moves as you scale up. But I think that's a little bit just a perspective in terms of the mentality in those early paces, for sure.

Tom Chavez: Matt, we were talking about the early stage sales and how they're sort of a whole company event. Founders are leaning in and selling, but everybody's selling. For my money, I'm not sure I've ever seen a sales leader enroll and engage the whole company. I've joked about how Matt used to, "Vivek, you go make cupcakes and serve them up on aisle five at 2:30. Tom, I want you to put on a tutu and dance to My Little Buttercup at 4:30." You just barked orders at the whole company impetuously, and I loved it, because you were never asking permission. Like no, no, no, no, no. Everybody needs to do these things, right?

Matt Kilmartin: Yeah. Yeah. Listen, I think-

Tom Chavez: Is that just your nature, or is that a move that you picked up?

Matt Kilmartin: Well, no-

Tom Chavez: And can you say more for other early stage sellers?

Matt Kilmartin: Well, I think it's a team sport, right? I mean, at the end of the day, I think what's been sort of an evolution for me is now I'm leading other functions sort of outside of sales is it's engineers get really excited that they've built a really cool feature, and to see Disney using it and driving a ton of value for them. Right? I think, ultimately, it's coming up with a product feature that drives a lot of value for customers is really kind of... discovering cool, new, innovative things is something that excites a product person. Right? So I think for, back in terms of this, I don't think it was me. I think it was sort of all of us, right?

Matt Kilmartin: There was this mentality that everyone sells. Right? And I think I've always thought that revenue is a scoreboard, in terms of how you're doing, how you're doing in terms of selling, how you're doing in terms of delivering customer value and retention. Are you building valuable products that people are using, right? And so I don't think it was just me pointing and grunting and you do this, you do this. I think it was more of instilled in the company that everyone sells, and I think, for early stage companies, I think that is a really important thing. Engineers to be able to get close to the front lines and hear sales calls and hear how people are using the product is incredibly valuable as well, so I think it was more of our motion.

Matt Kilmartin: And I think you covered this a little bit earlier, just early stage customers, they want to hear from the CEO, too. Right? They want to hear from the CTO. They want to hear from the founders. They need to believe in the vision, right? We had something recently come up at Habu where a big exec from a soon to be customer wanted to meet with us just to make sure we were well capitalized, and they wanted to invest with us. And we've done the same thing at Habu as well. I think it's just the willingness of everyone to sort of roll up their sleeves. But part of a selling motion, though, Tom, I think what you're asking about is, especially for an enterprise sale, there's a lot of different stakeholders, and I think getting smart around aligning the different stakeholders on your side to the stakeholders on the buyer's side is an important selling motion to embrace. I think we did a good job at that at the last project for sure, and trying to do at Habu as well.

Vivek Vaidya: Yeah. It's interesting, Matt, as you talk about engineers getting excited about things that they've built being used by customers and whatnot, that excitement, I think, is stage agnostic. That excitement continues as the company grows as well. Right? So as you think about, or rather, as I reflect back on our partnership, a lot of it was tribal in the early stages. Right? How do you see that evolve across engineering, product, marketing, and the relationship of those three groups with sales as the company evolves and scales? What changes?

Matt Kilmartin: Yeah. It's so interesting you say that, Vivek, because we're actually going through a process at Habu right now. We're up to 50 employees, but we're sort of defining our operating rhythm. Because those things you could do early on when it was one or two sales people and maybe six engineers, it's a lot more tribal and a lot more fluid. Now, all of a sudden there's a lot more people, so you have to establish some work architecture, if you will, and some sort of operating rhythm to just have information flow more seamlessly throughout the organization and whatnot.

Matt Kilmartin: So listen, I think, in those early days, I think everyone sort of has to learn by doing, right? And I think that... I think a mistake sometimes startups make sometimes is they maybe hire a CRO a little too early, when they might just need a director of sales or a VP of sales who's a doer, who can hire a couple reps to figure it out together, and then they can sort of, once you have some success, then you can write a playbook, right? And start to figure out the other functions, in terms of dividing and conquering. Do you need sales engineers? Do you need a rev ops person? Do you need an enablement person? Do you need a lead gen person? Right?

Matt Kilmartin: Sometimes I think that startups maybe scale a little prematurely, where they just probably throw too many salespeople things too early, when you don't have a playbook figured out, and you just don't know enough to write a playbook. Right? You kind of learn by doing. Fortunately, I think, that Habu now, we've got enough customers driving us value. We're sort of at that playbook phase. But I think your question as well was in terms of just the other functional groups, right? At the last project, we were very intentional around cross functional syncs.

Vivek Vaidya: Yeah.

Matt Kilmartin: Right? Sales, marketing, customer success, sales. Because you lose that you and me and a few other people rolling up our sleeves, sort of figuring it out together, and you start to implement some work architecture to facilitate those knowledge sharing opportunities. Because it gets harder, right?

Vivek Vaidya: Yeah.

Matt Kilmartin: Because the reality is one of the things we're going through now is a lot of the meeting cadence we had before, it's not going to work with a lot more people now, so really just trying to get those processes in place.

Vivek Vaidya: And remote makes it hard too, right?

Tom Chavez: Hundred percent.

Vivek Vaidya: Back in the day, even if we were spread out across multiple locations, there was still critical mass within each location. Now, there's one person in their house all over the country, so setting up those... Especially as you're growing, setting up those processes becomes even harder, I'm imagining.

Matt Kilmartin: Yeah. Yeah. It's definitely requiring some new moves, for sure, especially the last two industry events we've been at have resulted in these COVID outbreaks, which haven't helped per se.

Vivek Vaidya: Oh, no,

Matt Kilmartin: But yeah. No, you have to be intentional about it. Right?

Tom Chavez: Yeah. Right.

Matt Kilmartin: Because I think the thing that's hard for people, especially people that aren't early on, you finish a call, you close your Zoom, and you're like, "Huh. Am I feeling the same way someone else is feeling?" You know?

Vivek Vaidya: Yeah.

Tom Chavez: Right.

Matt Kilmartin: So I think we are definitely implementing some things to try to address some of that, and I do think it is important to still try to find opportunities to get together as well, like you said. But the world has definitely changed in work, as we know, and also in go to market and sales, as we know, via all these new technologies and tools. In some ways, it maybe lets us have a little bit more balance. We're not flying on planes everywhere like the olden days as much, but it definitely makes collaboration harder for sure, Vivek.

Vivek Vaidya: Very hard. Yeah.

Tom Chavez: Right.

Vivek Vaidya: Yeah.

Tom Chavez: Well, so Matt, you mentioned the stages, and there are these sort of enduring imperatives that apply across all stages, engineering, commitment to customer success, as Vivek points out. But there are still, particularly in sales I think, some stage specific markers. Reminds me of all the conversation now about are we in a recession? Economists can only actually call recessions definitively post hoc. After they've already happened, they look back and say, "Okay, that was the start of the recession." So it strikes me that sales, as you move from stage two to stage three, there's no definitive marker. You kind of look back like, "Oh, wow. That just got different. Didn't it?"

Matt Kilmartin: Mm-hmm.

Tom Chavez: So give us some commentary or some ideas about when does it get easier? When do you know that you crossed one of those stages? How do you think about that?

Matt Kilmartin: Yeah. It's a really good question. If I just think about sequencing stages, I talked about just the doing, learning by doing with maybe the revenue leader... forget the title for a second... with one or two other people, I think that, as you have product market fit, if you will, and some customers, I think that is a next stage, where you're actually starting to build a sales team, and you're starting to build a revenue operation. So it's less about just selling and getting those early customers. It's more about, okay, how do we start to think about some work architecture to scale this thing? And as you start to hire more sales people, right? And so some people might do it by numbers, in terms of that.

Matt Kilmartin: I think, as you're starting to get productivity with sort of the, for lack of a better word, sort of the capacity you have, that those are good markers that it's time to even pour more gas on the fire and scale. But if I think back to the last project, I think, when you start to get some repeatability around your ideal customer profile. So the last project, it was publishers. It was media entertainment companies, and that was who we were going after. We had a very clear list. We had a very core value prop, and I wouldn't say it ever got easy, but after you get like your Turner and the Meredith and some of these other... New York times, you start to have those key reference customers, and selling does become a little bit easier. Right? And you sort of build a sales team to do that.

Tom Chavez: I see.

Matt Kilmartin: And then you build the related infrastructure, where you want to have people do lead gen, and you want to have people to do enablement, and you want to define your selling process, and you want to have proper forecasts and rev ops, so I think that's some of the supporting cast, supporting groups that you bring in to help the this sales team. I wouldn't say it gets easier, but I think, once you start to have some repeatability, I think that's when you start to scale even more. I know you talked a little bit about founder led sales, and as you're entering adjacent market, you need to move. You go back to that. At Krux, when we moved to sell to marketers, we had a very similar downshift, right?

Tom Chavez: That's right.

Matt Kilmartin: And then we that's sort of had the playbook for selling to marketers. Right? And we scaled that. So the one thing... I know we've talked about lessons learned and mistakes. I do think you have to design for scale early, though. I think you have to think about getting a sales operations partner. I think you have to think about enablement. I think you have to think about these work architecture things early, because-

Tom Chavez: Yeah. Let's really amplify that, because we all spent, I think, too much time, depending on heroic events and contributions from individuals, and I think we've all really learned that lesson. Invest in enablement and sales operations early.

Matt Kilmartin: Yep.

Tom Chavez: If it's six months too early, don't worry about it.

Matt Kilmartin: Yeah.

Tom Chavez: It'll bear fruit later.

Matt Kilmartin: I think the thing, too, is, there's this metaphor out there of a sales leader being a builder or an architect. An architect designs the plan, and the builder just sort of goes and builds and does. Right?

Tom Chavez: Mm-hmm.

Matt Kilmartin: The vast majority of revenue leaders are builders.

Vivek Vaidya: Builders. Yep.

Tom Chavez: Right.

Matt Kilmartin: So those supporting roles can help a builder scale. In some ways, you kind of said that... You were describing the Krux journey and what I did in the beginning and kind of the run up. I had a lot of really great business partners I worked with to help us define the playbooks, define the methodologies, and to help build the work architecture, because in those early days, it's building. Right? But then you got to start to think about architecting a revenue operation. I think those supporting functions can help flush out white spaces for people, too, and help people scale, for sure.

Tom Chavez: Yeah. Well, Matt, I know we're getting down to time here, but maybe, I got to ask, if there's an early stage sales leader, and again, let's not get caught up in our nickers on the title, but somebody who's thinking of joining an early stage company in a selling role, what advice would you give them? Let's qualify it a little further. They're coming from an established company, a stage three, a stage two. Let's say it's their first super early stage move.

Matt Kilmartin: Yeah.

Tom Chavez: What advice?

Matt Kilmartin: One of my things is I do think... I listened to this other podcast, which was actually about revenue leaders' journeys. It's a really good one put on by another VC, and there's one recently. I think it was the CRO of Vox talked about sometimes people who come from some of these larger companies, they sort of were operating the playbook as opposed to writing the playbook. Right? And I think they sort think they know all the answer, so I guess my advice would be for anyone, if you're coming from a larger company to a smaller company, first of all, do it. It's a ton of fun. It's really cool to build something from nothing and be in the trenches and creating a market and whatnot.

Matt Kilmartin: Second thing, though, I would say is to really partner, know the people you're going to war with, really believe in the team and really the product that you're going after, the market opportunity, and approach it with some humility. I think it's easy to, "Hey, I wrote the playbook at this company or that big company," and to think you can just kind of come and do that at an early stage company. I think there's nuances to every market and whatnot, and it's not, especially in those early days, it's not just sort of wash, rinse, repeat. Right? I think, as you start to scale, sales becomes a lot more formulaic, and it's a lot more numbers, and it's pipeline and pipe progression and number of AEs, and it's a lot more of a numbers game. But I think for the stages of what we're talking about now, Tom, it's not as formulaic. My advice would be to do it, approach it with some humility, get dirt under your fingernails from right in the beginning, and then start to think about scaling and building the company more. But that would be my advice.

Tom Chavez: Very wise advice. Hey, Matt, got to ask. Are you still sleeping with your cell phone on your chest?

Matt Kilmartin: Next to the bed, Tom.

Tom Chavez: Next to the bed. See that's-

Vivek Vaidya: Progress.

Tom Chavez: That is progress.

Matt Kilmartin: Progress. Yeah. Yeah. Just in case you wake up at like 2:00 AM and you want to Slack, you have an idea. You know? How about?

Tom Chavez: Or in the old days, waiting for a call from the other side of the planet for a deal that was in play or whatever.

Matt Kilmartin: Yeah. Yeah, exactly. SoftBank.

Tom Chavez: Nobody could ever accuse you of phoning it in, Matt Kilmartin. Well, listen, this is incredibly wise advice. So great to have you. Share it. Impart it with us on this podcast.

Vivek Vaidya: Thanks for joining us, Matt.

Matt Kilmartin: Thanks for having me, guys.

Tom Chavez: All right, everybody. That's going to be a wrap for this episode with of The Closed Session. Thanks for being with us.

Vivek Vaidya: See you next time.

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