The complexity of complex enterprise sales.
Gil Dibner

We facilitated an interesting call today between two of our portfolio companies. One is very early, pre-revenue. The other is effectively breakeven and just signed an eight-figure TCV multi-year enterprise contract. Both companies have in common the fact that they sell large complex transformational software systems to large complex old-world industries. This is “traditional enterprise software” on steroids.

We discussed the human aspects of building out a team while in founder-led sales mode. As I listened to the more experienced CEO outline how this was done, the complexity of the effort became apparent:

• Industry credibility. Some members of the founding team brought enough industry credibility and insight to the table so that they could (1) get in the door and (2) answer the tough questions posed by customers.

• Sales experience. Some members of the company’s extended team (i.e. specific advisors) brought experience with defining and managing similar big-ticket sales processes. These people provided a level of insight into sales process management that no one else on the team possessed, but they were far too senior to work full-time at a subscale startup.

• Sales execution horsepower. A critical early hire is the key sales lead at the company. This person brings the right mix of entrepreneurial skill, sales experience, and creativity to the table to help the CEO/founder execute and run the sales operation. It’s a very difficult mix to find.

• Founder energy. At the end of the day, the CEO/founder is a critical part of the mix. The founder’s incredible knowledge, passion, energy and charisma are an essential part of winning key accounts and translating market feedback back into product rapidly.

What I realized in this conversation is the mix of skills, capability, and experience necessary to drive success in an early-stage complex enterprise sales environment. It’s not one skill, and it’s not one person. There is no magic-bullet hire that would have worked here. Through trial and error — and with considerable grit — the team managed to cobble together the necessary pieces of the puzzle to drive some extraordinary results.

No playbook. The takeaway, I think, is that there is no one right answer and certainly no playbook that will work across multiple scenarios. Every company is different, and every team is made up of different pieces. The challenge for CEO/founders is to be absolutely ruthless and clear-eyed about what skills exist on the team, what capabilities are missing, and how to realistically obtain those capabilities. If the team lacks experience in managing complex sales processes, it may be impossible to hire the right persona to bring that in on a full-time basis because the company is too young and its product is too unproven to attract senior people..In some cases, a hard-working and creative “generalist” committed to taking responsibility for the commercial success of the company, armed with the right advisory resources, and allied with a founder who will stop at nothing to win… might be the winning formula.

Ultimately, your success story will be yours to write, and there are no rules.

Happy Thanksgiving! We wanted to wish those of you celebrating Thanksgiving (in the US or abroad) a very happy Thanksgiving. We will be taking next week off from the newsletter, but we’ll be back on December 5.

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ENTERPRISE/TECH NEWS

OpenAI: 0, Microsoft: 1. After co-founding the company in 2015, Sam Altman led OpenAI to an $80B valuation and had just shared several exciting launches at DevDay, when the board abruptly fired him Friday. The news caught everyone off guard, including OpenAI’s biggest investor, Microsoft. After a weekend of turmoil, where the board tried to rehire Sam after investor and employee backlash, negotiations fell through and Microsoft swooped in and hired Sam Altman, Greg Brockman and a number of other OpenAI employees. They will now “join Microsoft as part of their ‘independent’ ‘AI Advanced Research Team’. All while Microsoft will have full access to all of OpenAI’s GPT and ChatGPT technologies, weights, IP, and other material components to continue to build out its AI CoPilot strategies.” Microsoft’s surprise absorption of OpenAI execs and employees, combined with their contractual access to all of ChatGPT tech and IP, will likely reshape the AI landscape with Microsoft at the forefront.

Germany’s Future Financing Act. Germany has passed a series of reforms to its rules for stock-based compensation at tech startups, with the aim to strengthen startups through better conditions for employee equity participation. The reforms, which will go into effect on January 1 2024, will defer taxes on employee stock options until the point of sale, so that they’re no longer taxed on their shares upon receiving them. The implications for attracting talent are significant. According to Hanno Renner, CEO of Personio, “this regulation is a big step to accelerating the entire flywheel in Germany and to make sure German startups have the ability to attract the best talent”.

Adobe facing antitrust warning. Last year, Figma announced that they were to be acquired by Adobe for $20B. Regulators are concerned that giving Adobe control over Figma, one of the few alternatives in the product design software market, could stifle competition and innovation. The European Commission is preparing a statement of objections to send to Adobe and Figma and are due to decide on the deal by February 5, 2024.

HOW TO STARTUP

The OpenAI board. The ongoing OpenAI saga and the board’s betrayal of Sam Altman has highlighted the importance of picking the right board members. As Ed Sim wrote a few years ago, “boards are never the reason for a company’s success but it truly can be the reason for failure. Choose wisely…” Will OpenAI recover from this? Perhaps, but the consequences of the board’s actions are significant. Vinod Khosla, founder of Khosla Ventures, believes that the OpenAI board has single handedly set back the promise of AI and human advancement. “OpenAI’s board members’ religion of “effective altruism” and its misapplication could have set back the world’s path to the tremendous benefits of artificial intelligence. Imagine free doctors for everyone and near free tutors for every child on the planet. That’s what’s at stake with the promise of AI.”

How to raise. Certain advice is truly timeless. This week we’re going to the archives and sharing advice Marc Andreessen, Ron Conway, and Parker Conrad gave years ago during a YC panel moderated by Sam Altman — watch the talk here or read the transcript here. A gem from Marc during the talk: “The key to success is to be so good they can’t ignore you. If you build a business that is going to be a gigantic success then investors are throwing money at you. And if you come in with a theory and a plan and no data and you are just one of the next thousand, it’s going to be far, far harder to raise money. So that is the positive way to put it, is to be so good they can’t ignore you. You are almost always better off making your business better than you are making your pitch better.”

HOW TO VENTURE

The 2023 bloodbath. Despite avoiding doomsday scenarios, the party has truly come to an end for both startups and VCs in 2023 — largely due to the dearth of exits which has kept capital locked up. Exits are at a decade low. “There were just 216 exits in the third quarter, down from 256 in Q2. That number, per PitchBook data, was the lowest total since the second quarter of 2013. Year to date, there have been just 752 exits. Last year there were 1,375, and in 2021, VCs saw exits from 1,979 companies.”

PORTFOLIO NEWS

Reco is hosting the CISO Series podcast, “Hacking the SaaS Security Journey” on December 15. Register here to join.