It’s just after the end of a quarter, and for VC’s that means many board meetings to review how portfolio companies have performed. Over the years of doing this, I’ve been shocked and surprised how many times I’ve seen good companies with great product/market fit miss their sales targets for an incredibly avoidable reason: they missed their sales hiring targets. As a result, they didn’t have enough quota carrying sales reps to make their number.
In many cases this wasn’t disastrous, and could be corrected in subsequent quarters. But in several cases, it caused significant problems with an upcoming financing, and damaged the company’s cash flow.
It was also frustrating seeing the founders realize that they could have easily avoided the problem, had they just been warned about it in advance. That’s the reason that I am writing this post.
The problem occurs because recruiting A-players is hard (see my last blog post “Recruiting – the 3rd critical startup skill”), and is frequently given a lower priority than is needed.
There’s another likely explanation why this happens and it has to do with the mental shift that is required of founders when it’s time to scale. As you’ll see in the diagram below, I believe there are three phases in a startup’s lifecycle.
In the first two phases, founders should be minimizing spend to buy themselves as much time as possible to figure out product/market fit, and a repeatable/scalable sales process. However once they have these figured out, they enter an entirely different phase, where they need to scale the company aggressively. This requires a huge mental shift, away from saving money and staying lean and mean, to hitting the accelerator pedal, and investing and hiring aggressively to scale the proven sales process. I think many founders don’t recognize the moment when that mental shift is required, and how their thinking and behavior has to change. Founders are used the feeling that it’s OK to be a little late with hiring as you’ll save some cash. But in the third phase, hiring misses turn out to be an execution failure that have direct and significant consequences. Continued…