Ali Ghodsi (w Ben Horowitz) on scaling a B2B software company
Podcasts · Business
Created by Rishabh Srivastava
This summary was largely done for my own note-taking, sharing it just in case it adds more value to other people.
I have no affiliation whatsoever with anyone in this note. This is a summary largely taken for my own reference, and may contain errors :)
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Why is it important: Has some really goods lessons for engineering-driven founders around scaling sales and marketing — and around actually charging the right amount for the value you provide
Keywords: Sales, Marketing, B2B
Highlights
This doesn't include Ali's own inspiring story (Iranian refugee, grew up in Sweden, became an academic, then grew into a manager). Do listen to the full podcast if you're interested in that
Origin story of the company
Started off starting Spark as a "Berkeley hippie". Wanted to democratize what Spark offered, open-source it, and give it away for free
But the world wasn't very receptive. At that time, it was all about Hadoop and Cloudera
2012 was when Ben Horowitz came along, and told the team that they were not doing it right. It won't take off by itself. You have to do it
💡 Don't fall into the trap of "If You Build It, They Will Come"
Start a company to make it happen. An open-source project won't get adoption by itself
They asked for a $100k in seed funding. But Ben Horowitz said that he wanted to be on the board, and if he wanted to do this, he wanted skin in the game. The first investment was $14M
Now, the company has over 2000 employees
How can technical founders manage their sales leadership?
The biggest mistake you can make is looking at this other person (the sales person), who has a very different culture and persona from you, is trying to use your own logical framework of thinking to evaluate a sales person
"He said stuff here that wasn't truthful" or "This didn't follow logically from that". If you use these metrics, you'll pass over a lot of great salespeople
If you hire someone with a very logical, engineering mindset — they'll probably suck at sales. Sales is fairly irrational and relationship driven
If you ask an engineer a question, he'll respond with an answer. Sales people never do that! They go, "why are you asking this? what are you trying to get at?"
If you ask an engineer, "Do you have this feature?", the engineer will go "yes or no". The sales guy will go "Why is he asking me about that feature? Which competitors have that feature? Who planted that fucking idea in his mind?"
Sales people are thinking, "What's the question behind the question? Where are you going with this? How will my answer impact whether I get to yes?"
Sales people will do that in job interviews, too! They'll often think, "Is this the right answer or the wrong answer? I'm not going to answer that way"
They got a sales guy who had been selling secure FTP (which is basically free as a technology) to healthcare companies for millions of dollars. He negotiated his compensation and equity really aggressively. That's a good thing from a sales person! He had spent years of his life negotiating stuff from procurement departments.
💡 As founders, you don't necessarily wants to hire sales people that seem like they are straight shooters or more logical. Sales people should be making obnoxious demands at the finish line.
When it comes to compensation, you ideally want to make it homogenous in a company. Except sales. The best sales people should have crazy high compensation, most of which should come from commissions. Similarly, if they miss their targets by a lot, they should be let go
You want to have one of two sales people who made a million dollars in a year, and hold them as something to aspire to for other sales people in your company
Engineers often make their own software for fun on the weekend. There are no sales people who sell fucking software for fun on their weekeds. Sales has to be competitive, and commission driven
Balancing sales and marketing
What kind of marketing leaders should you seek as a B2B SaaS company? Should you hire a marketing or sales leader first?
Marketing and Sales go hand in hand – it's really important that their leaders get along really well with each other
Marketing delivers leads to sales, and sales runs with it. If sales tells you that the leads are crappy, listen to them
A lot depends on what kind of company you have. If you're like Tableau and selling Desktop licenses for $2000, you depend a lot more on marketing. If you're like Palantir and signing contracts that are 7-8 figures, you want to focus more on sales
This totally depends on what kind of sales motion you have at that point in time. More on these motions is at Approach to B2B Growth and Sales
If you're hiring executive, you're giving up a lot of money and equity and you're buying knowledge. So make sure that you're hiring someone whose playbooks and experience are in line with what you're looking for. They have to come from the same domain, and have to have experience selling to customers that you're selling to
Don't make the mistake of not building a sales team
Early on, they made the mistake of asking "What kind of GTM do I want? Who do I want to be? I would like to have $10k kind of deals, I don't even want the million dollar deals"
They thought that it would be better if everything would be self-serve and automated, and you could just swipe a credit card to get the product.
This is stupid. In Databricks case, they take a machine learning system and can improve business results by a few percentage points. The companies that will have the most benefit from this are billion dollar enterprises who have massive data and will make hundreds of millions of dollars from just a one percent improvement. It's stupid to give them the service as self-serve. You will hardly get any adoption (because these companies need to be sold to). And even if you do, you'll get a tiny amount of money relative to the value you're creating
The mentality of "I don't want to hire a rolex wearing sales person" is stupid. Trying to have self-serve channels with a really low CAC doesn't get the job done for the enterprise market. The brand helps for sure (more on it in the subsequent sections). But you need to have effective sales in order to deliver value to your customers
Airwork vs groundwork
Sales is typically executing against quarterly/annual targets (groundwork)
Marketing is typically executing against a longer term vision (airwork)
Both are really important!
If marketing reports to sales, you typically have very weak marketing. If sales reports to marketing, typically they have no revenue. They have to be peers.
Early stage thinking
The brand is really important. If the sales people are saying that “we walk in the door and no one knows who we are”, that’s a problem. Because in every meeting, you have to explain who you are. That really kills your brand
Databricks would not be where it is today if not for Spark. The sales guys would just to do every account and say, "Do you know Spark? We created it. No one knows it better than us. You should buy our software". Brand awareness opens up so many doors that otherwise would've been completely shut
Notes on sales from other sources (not this interview)
Based on other conversations I've been having with software sales leaders:
Enterprise selling is very irrational, highly based on relationships, and has clients who are intent on shooting themselves on the foot
It’s more about understanding how a company works than about understanding the exact value prop
You can close sales worth 8 figure amounts with large enterprises without either your or your negotiating counterparts knowing exactly what the solution was. It was more of a “I understand that you face this problem and completely understand the internal challenges in your organisation. Our team has empathy and works very hard, and is sure that we’ll be able to solve this problem for you. We’ve done this before, and I’m putting my name and this relationship on the line. Trust me. If anything goes wrong, you can call me anytime and I’ll get it fixed straight away — you have a direct line to me”