Luigi MallardoFinding the right go-to-market and revenue growth leaders for SaaS startups and scaleups is a big challenge.
Economic risk
Many hire senior leaders when they are not ready.
Some readers may recall my article about the “Maradona” CEO.
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Picking the right VP or CRO is a big and risky investment. Pavilion just published the latest compensation study that includes fresh insights about cash plus equity packages.
For an early stage startup it means hundreds of thousands of dollars for the actual plus the opportunity cost.
What is typically wrong (more to read here):
- Timing. The company hires a “pedigreed” sales leader and expects high-growth revenue from quarter 2 BUT fundamental “postures” of the whole go-to-market strategy are still missing. For example it has not validated yet the ICP (Ideal Customer Profile) or the key use cases and verticals.
- Expectation. Nine women cannot have a baby in one month. If you haven’t reached revenue predictability yet, the expectation towards the new Leader should be set in terms of building that predictability.
- Profile. Typical mistakes are hiring people who are too junior to make the job or too “corporate”.
- Onboarding. A VP Sales or Chief Revenue Officer is the most expensive hire in an early stage startup. You can’t win by hiring “Michael Jordan” and leaving him alone. You need to know how to manage the onboarding of such a profile and create the conditions to make the person successful in your business.
As a result of the above issues:
- The average tenure of a revenue leader in VC-backed startups is less than 18 months (12 months if first time leader).
- Companies waste hundred of thousands € in hiring, headcount, operational and opportunity costs.
- Founders need additional funding and dilute their equity share (if existing VCs decide to support the follow on).
- Investors and the whole team become unhappy.
- The Boards tend to enter a “circle of hell” of Consultants, Advisors, hiring one VP after the other.
Startup risk
You believe it was a Cinderella but…
The harsh reality is that most times investors bet on what they believe to be a future “Cinderella” but often they realise in 12-36 months they may have invested in her “Stepsister” instead.
In that case how should VCs deal with the fear of write-off in such a scenario? Link.
How to reduce the startup risk
Board and Founders tend often to overlook at the symptoms instead of focusing on the causes.
The symptom is typically not reaching a revenue target that ultimately drives the company to fire the VP Sales because the assumption is that it’s not the right person.
Replacing the leader with a new one does not lead to a better result most of the time, as far as the cause is not well understood.
Often in my experience the main issue is not a strict Sales problem. It’s first of all a problem of ICP and customer segmentation definition, competitive positioning and strategic focus. The People element and executional implications come second.
It must also be said that a key challenge is that Sales leaders in the SaaS space are typically great individual sales contributors that at some point in their career (sometimes too soon) get promoted to a VP role.
The truth is that at that point in time their job is changed. The company does not need a great salesperson who is also good at managing people.
What the business needs is a strategic go-to-market leader for the organisation who is able to visualize the next 3 years, shape the go-to-market strategy of the business and translate it into an execution plan for the next 12-24 months, just to start with.
That’s a different job and not a job for everyone.
So, how do you get the CEOs to underline the right problems and make the right choices?
The rise of senior fractional CROs as a Service
In the last 12-24 we have seen a rise of senior revenue leaders who moved to fractional / as-a-Service roles.
Having an experienced revenue leadership “in action” is the most important asset to turn things around. Someone able to zoom-in & zoom-out in real time and be there for both the strategic definition and executional deployment.
I’ve been one of the pioneers in Europe moving 100% to an as-a-Service model since late 2017.
As a CRO as a Service I’ve helped three B2B SaaS scaleups ( Woffu, Tiendeo, Wide Eyes) build strategies, teams and processes in Europe, LatAm, US, and achieve exits as a result in 2022-2023.
It’s not classic consultancy or strategic advisory.
Through a systematic routine of a weekly operational day plus short catch-up calls/messages during the week plus (mandatory!) ongoing internal team execution I’ve been instrumental to build from scratch and regenerate go-to-market strategies and engines in those businesses.
It’s not only about setting the right strategies, sales process and playbook. The key part of the work is the People and the hiring & coaching of more than 120 people to set them for success and help them execute, including juniors, managers and managers of managers (Directors and VPs).
What are the 3 key learnings?
1. Investors and Founders love it.
The ROI for the business is much higher than having to hire senior leadership organically.
The risk is lower.
Compared to an organic revenue leader, the “as a service” model can deliver pretty well the 4 most important things that you need from a leader. Only exception is selling herself which is the least important thing for a leader by the way.
2. It’s a win-win model if the cooperation vision is for the medium-long term, not transactional.
There is still a diffused mindset that if you are not an organic VC Sales or Chief Revenue Officer, then you must be a Consultant or Advisor. Well, it’s not necessarily like that.
As far as the business model is concerned, the focus is on outcomes linked to clear milestones like it would typically be for an organic VP or Chief Revenue Officer. You can build alignment with the medium/long term objectives of Founders and Investors with a much higher level of flexibility and agility.
3. Scalability of the model.
On an individual leader level, of course the scalability is limited. No more than 2 maximum 3 companies at the same time per year.
Nevertheless I strongly believe that a Revenue Engine as a Service operation can become scalable if internalized by “enlightened” VC and Private Equity firms.
Early stage startups do not need just money. They do not need advisors not involved in making things happen.
They need money & help on setting the right strategy & execution. In real time.
CONCLUSIONS
The model of Fractional Revenue Leadership as a Service can be highly effective in reducing the 3 key risks faced by startups in the 0-20M€ ARR range.
Reduces the economic risk.
Compared with an organic revenue leader not only the investment is lower and more agile/flexible, but also the ROI is higher in relative terms.
Mitigates the startup risk.
It moves out from the “startup zone” to the “scaleup zone” through more professional approaches and processes.
Minimises the risk of making mistakes and then later regret.
It’s not a magician with a wand but an executor with a clear strategy and game plan to reduce the 3 key risks.
This article was written originally in 2020 and updated in January 2021 and refreshed in April 2024. The essence of the original message has not changed.
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