The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:26:33 · Harry Stebbings, Max Freeman
[00:26:33] S1: But... So you you don't engage on discounting? Because so many founders say to me, I just don't know how to do it. I wanna close the deal, but they want a 20% discount. [00:26:41] S0: Yeah. I I think, like, early on in the conversation, if we're coming to discuss economics and pricing after call one, that's that's usually a a bad sign. It's not a sophisticated buyer on the other end. Unless it's super down market, you're talking to a 10 person startup founder, and you're trying to one call close, like for sure, maybe I'll I'll engage that way and we'll discount to get the deal in the door. But, upmarket, no, you have to co author business value assessments. Like, really have to understand what are they trying to solve and what does the total cost of ownership look like. Are you trying to get a margin win? Are you trying to make your accounting function more efficient and give yourself FTE leverage? And if you could mutually agree to that, you could circumvent any pricing concessions because, hopefully, you're driving 7 figures in value creation. [00:27:32] S1: Speaking of driving seven figures in value creation, we're gonna go back to this, like, beautiful interview process because I've impressed you so much. You're so excited for me to join ramp day one, and you wanna give me a job. And it's time for comp design. Okay? Compensation design. Mhmm. Can you help me? How do you advise founders on comp design for the first AE and the first SDR?
00:27:32 · Harry Stebbings, Max Freeman
[00:27:32] S1: Speaking of driving seven figures in value creation, we're gonna go back to this, like, beautiful interview process because I've impressed you so much. You're so excited for me to join ramp day one, and you wanna give me a job. And it's time for comp design. Okay? Compensation design. Mhmm. Can you help me? How do you advise founders on comp design for the first AE and the first SDR? [00:27:55] S0: I usually advise to not have a comp plan. I usually advise to do a 100% OTE for at least the first two quarters. You just don't know what you don't know. And I've actually seen founders get into some trouble where they make a quota that gets blown out in the first six months, and it's holy shit, I owe this seller multiple 6 figures. I've seen the inverse happen as well where you arbitrarily finger in the air, oh, I think this person could close this amount, or I think this person can book this many meetings, and it's not attainable. And then you're struggling to get momentum and a tailwind going. [00:28:29] S1: And then confidence gets hit, and confidence is hard to regain once lost, I find. [00:28:34] S0: Correct. I've seen it, though, [00:28:35] S1: where that even when they do okay, I'm making up numbers. Say they close two fifty, but you set me $502.50 would have actually been okay. It was it was solid, like, decent, not a bad start. But because it was half of what you set, I feel like I'm really bad.
00:28:35 · Harry Stebbings, Max Freeman
[00:28:35] S1: where that even when they do okay, I'm making up numbers. Say they close two fifty, but you set me $502.50 would have actually been okay. It was it was solid, like, decent, not a bad start. But because it was half of what you set, I feel like I'm really bad. [00:28:49] S0: That's right. And in some ways, there's there's a little bit of benefit to that where, you know, if you get the right person, they've got a fire lit under them, and they feel like they're not meeting expectations. There's some healthy angst, but it depends on the the archetype that you bring in. [00:29:03] S1: So which is Paul, so we're a 100% OTE. When does that change, and how do we then instigate a different discussion around correcting that plan?
00:29:03 · Harry Stebbings, Max Freeman
[00:29:03] S1: So which is Paul, so we're a 100% OTE. When does that change, and how do we then instigate a different discussion around correcting that plan? [00:29:11] S0: Data. Like, typically, this would take... It depends on what segments you're going after, but if you have cycle times that are less than six months, you should have enough data in the system to figure out, okay, this person has been in seat for two months, they've ramped for the first ninety days, we're seeing stage progression here, we have reason to believe that pipeline is going to be X, let's make a quota that is both ambitious and somewhat reasonable based on the data that we have. And you should never hire one seller or one SDR at a time, because the problem is how are you going to benchmark their performance? How do you know if they're good? You're to benchmark them against yourself as the founder? I don't think that's reasonable. Also as a founder, if you're going to be spending time onboarding a seller, that's laborious, that's expensive, do it in pairs. And there's competition, there's collaboration, they're not lonely. I strongly advise against one at a time. [00:30:01] S1: Do we always shed one, or do we sometimes keep them both? [00:30:04] S0: How do you mean? Like, if someone isn't performing well? [00:30:07] S1: By nature of having two, one will always perform worse than the first. How often do you keep them both versus get rid of one?
00:30:07 · Harry Stebbings, Max Freeman
[00:30:07] S1: By nature of having two, one will always perform worse than the first. How often do you keep them both versus get rid of one? [00:30:14] S0: It depends. If someone is just complete outlier destroying the other seller, yeah, you you probably need to shed that person. If it's a 10 to 20% delta, you have to you have to go deeper and unpack unpack it. Like, what why why is this person winning more? Like, what structural advantage might they have? Is it pipeline that I gave them? Is it pipeline that came from our cap table? Is it something else? Do they know the product better? Are they more motivated? Do they give a shit and the other person doesn't? Like, this is this is on the founder to go ascertain. [00:30:46] S1: So for the 100% OTs, sorry, going back to that, that's for SDRs. Does that change when we're doing comp design for AEs? [00:30:53] S0: No. It's for... It's unilateral across Unilateral. Early go to market teams. [00:30:57] S1: Yeah. Wow. What are the big mistakes you think founders make when they're doing comp design? Because, again, like, we have challenging nuances. Like, when you have new products, you wanna incentivize them more. You wanna encourage bonuses for selling more of those. But I don't wanna then have a load of people sell all of that and none of the core. How do you think about that?
00:30:57 · Harry Stebbings, Max Freeman
[00:30:57] S1: Yeah. Wow. What are the big mistakes you think founders make when they're doing comp design? Because, again, like, we have challenging nuances. Like, when you have new products, you wanna incentivize them more. You wanna encourage bonuses for selling more of those. But I don't wanna then have a load of people sell all of that and none of the core. How do you think about that? [00:31:17] S0: I have so many thoughts on this. Depends on stage. First, if you're an early stage founder, you're probably still trying to take one product to market and you want to focus on that. You really need to understand your ICP. Said another way, it's so much more valuable to have 20 customers that are raving and thrilled about one single product offering than you in a half assed way serving six customers on multiple products that aren't as thrilled. You need to get the tailwind going of case studies, references, and positive momentum across your business. Later stage though, like where Ramp is today, incentive design is incredibly important. And I think it's existential to over incentivize new products to get off the ground. And so thinking through 2x to 3x quota retirement for new products, you got to get the again, you have to get the momentum going such that you earn your way into more multiproduct customers, more case studies, more momentum.