The a16z Show - a16z Podcast: Stories and Lessons in Enterprise Sales

Episode Date: January 30, 2019

with Mark Leslie (@mleslie45) and Peter Levine What does it actually take to win at enterprise sales? In this episode, Mark Leslie, former CEO and chairman and founding team member of Veritas Software, and a lecturer at the Stanford Graduate School of Business, and a16z general partner Peter Levine -- who worked together at Veritas -- share stories from the field all about sales and entrepreneurship in the enterprise. The wide-ranging conversation covers everything from what makes a good salesperson; to how to actually close that deal; to how to build a company that best incentivizes your sales reps. This episode is based on a conversation that originally took place at an event held at Andreessen Horowitz for veterans participating in the BreakLine education and hiring program for shifting veterans into careers in the tech industry. Stay Updated:Find a16z on YouTube: YouTubeFind a16z on XFind a16z on LinkedInListen to the a16z Show on SpotifyListen to the a16z Show on Apple PodcastsFollow our host: https://twitter.com/eriktorenberg Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi and welcome to the A16Z podcast. This episode is a conversation between Mark Leslie, former CEO and chairman and founding team member of Veritas Software and a lecturer at the Stanford Graduate School of Business, and A16Z general partner Peter Levine. In the conversation, which is based on an event held at Andreessen Horowitz for veterans, Peter and Mark talk all about sales and entrepreneurship from what makes a good salesperson and how to best incentivize them to how to build a culture that engenders loyalty and trust. To learn more about this subject, check out Peter Levine's video sales primer on how technical founders should think about sales on A16Z's YouTube channel. We teach at Stanford together. We've sit on boards together. We've worked together. And so this is one of those occasions, which is super awesome for me to be here and super awesome to have Mark here. You often talk about the importance of authenticity as an entrepreneur. What do you mean by that? To me, authenticity in that context means that the person whose idea it is, And the thing they want to craft and do comes from real experience, that they're solving a problem that they personally experienced, that they see their customers' experience, and it has a real,

you know, kind of substance to it for those people. There's a lot of people who are really smart and look at the world and say, I think there's a problem over there that I can solve. I don't think that's so authentic. And I think that the probability of success is much lower when you're trying to solve a problem that you've never personally experienced. So you have people come from a company that's in a similar technology. They have a network of people. They have seen the problems that they themselves experience that are experienced in their company, the companies are their customers. And then they say,

aha, I see something that no one else sees and it can make a difference and I can go build the company about that. So that's what authenticity means. Now, that's for starting a company. There's another word of authenticity having to do with leadership. separate concepts. And authenticity in leadership is being a real person, being comfortable in your own skin, being willing to admit when you make a mistake publicly, and to take responsibility for that, and having a human touch. And it's a crucial element of success in leadership is being an authentic person, being a real person, being someone who doesn't try to be something they're not. They are who they are and they are kind of internally accepting of that.

I'm curious, you think this authenticity can be, is it something that can be taught or is it innate in people coming into an environment? You know, you talk about it, but how do I know? Am I authentic or not? And can it be taught? Yeah, so one of the things I say is that you can teach an entrepreneur how to go start and build a company, but you can't teach someone to be an entrepreneur who's not an entrepreneur. has to do with an inner drive and their personal ambitions and desires and their risk tolerance, their willingness to go put themselves at risk to accomplish something. So can you teach someone to be authentic? I don't think so, how they deal with the rest of the world around them and people and their social interactions and all the things that go with that and their business habits,

all those things together describe character. and I think character, my personal opinion, is as immutable. I don't believe that you can change behavior of people. I think people can change their own behavior if they're so motivated, but that's a long, hard journey that people embark on by themselves. But I don't think you can beat it into people. I think they are who they are. And my view has always been when you have a bunch of executives that have different jobs.

You say, well, how can I get the best from each and kind of amplify their strengths? and how can I reduce the impact of the problems, meaning attenuate the weaknesses? And so I was thinking of an organization as having a lot of lines in it, and then the job of the leader of the organization is to blur the lines to kind of do that amplification and attenuation. We often back technical founders or founding teams that have very little sales expertise, yet it becomes a critical part of a company. So how do you think about approaching sales from the perspective of the founder who's never done it before? So the first thing you have to do is sell someone on becoming your partner.

Then you have to sell friends and family on providing you with the seed money. Then you have to go sell individuals to give up their career and invest their future in you. Then you have to go out and raise money by selling venture capitalist shares for money. that's the selling thing. I'm going to give you shares and you're going to give me money, right? So we're selling. And then you develop your product and then eventually you go out and meet customers and you've got to go sell to them.

But at this point in time, there's nobody better equipped in a startup company to talk about the beauty and the benefits of the product and the vision of the future that we're painting. There's nobody better equipped to do that than the founders who started the company for that reason. sales in the very early stages can't be subcontracted. Even if you hire a salesperson, they don't know anything when they get there. They have to go learn about the product and the customers in the market and everything like that. And where does that knowledge come from?

It comes from the founders in the company. So one of the things that technical founders, you know, they're pretty good usually at the vision thing. They're not so good at asking for the order, right? And in sales, you know, you go spend time, you tell them about all this stuff and you say, so look, I think you guys are interested. why are we going to do a deal here, right? And, you know, make something happen. They're not comfortable kind of getting to that point. So you have to get to that point.

Now, you are going to sell for the rest of your life in business. You're going to sell your ideas. The higher up you get, the more opportunities you have to represent your company and its mission and its ideas and its product and everything else in front of important people. You will be selling all of your life. When you are a leader of a company, you define the mission and the vision, and then you evangelize that to the company. The way you get people to subscribe to it is you get them excited about it. And that's another version of selling. So it's persuading and yielding from the persuasion some outcome that has benefit to you.

And you're going to do it all of your life. And look, it takes a village to make a company, right? I've got to have people to do all kinds of things, and it's fine. But if you want to go, you know, do that, you better learn. and how to sell, present, persuade, et cetera. Perhaps a follow-on question to this is, what makes a great salesperson, and is it a viable on-ramp, let's say, into a company,

joining a sales group as opposed to marketing or engineering? This is a chicken and egg thing, right? You show up and say, I want to be a salesperson, and say, well, what have you sold so far? Well, this would be my first time. You should never be embarrassed about that. Everyone's got to start somewhere, right? So I think the way, if you want to break into sales in the valley,

I think the place of where there's the most tolerated, earns for that is what they call inside sales. You know, you dial for dollars, you're scripted, you're, you know, you have a manager that's close by. And what happens to people in inside sales, the people who show promise and have, you know, energy and ambition, they always get promoted to account executives that have, you know, more responsibility. So the typical, what they call OTE on target earnings is today around $300,000, half in base, half an incentive. And then if you sell more than your quota, you can make a lot more than your 300K. And it was always my privilege as a CEO to bring someone up on the stage and say, you made more than me this year. Here's your

check for a million dollars. It's a very highly paid profession. So I've worked with people who come from an engineering background and say, well, why does salespeople make so much money? It doesn't seem right because engineers are smarter. And then I say, so do you want to be a salesperson? And I say, no. I say, that's why they make more money. There's a large quantity of people out there in a world that, you know, someone says no to them, and they're just, like, crushed. And if you're in sales and someone says, no, you just dial the next guy. You know, often there's this interesting perception between sales and engineering

that constantly sort of butts heads a little bit, especially since companies typically are founded by technical engineers. And then you bolt, quote-unquote, bolt on a sales organization. and everyone's worried about culture and kind of the changes and all of that. Eventually, everyone gets through it and you have a sort of a normalized kind of situation where you have sales and engineering and everyone, you know, mostly works together. But that's very typical in the valley here. And one of the jobs of leadership at that stage in the company is to build the bridges between those two.

You know, there's kind of a built-in on both sides and like, huh, who are those guys and I don't get them and everything. And you build bridges. You tell each one while the other one's more important, you know. So one of the big complaints I always get is, you know, the sales guy say the product's late. I'm a sales guy. I'm accountable. How come nobody's accountable? So my experience with engineering projects is that they can either be on time.

They can be fully featured or they can be high quality. I've never seen it all come together on the same day. So over years, I became very zen about the whole thing. I was like, hey, look, it'll be ready when it's ready. Let's make sure it's a great product and got the features in it. and we'll just manage the company around the fact that, you know, I don't know if you know about engineering chronology, engineering time, you know about engineering time.

If an engineer says, we'll definitely have it by next year, that means December 32nd. If they say I'll have it this quarter, that means March 32nd. I mean, it's the last possible moment of the time is always the way they kind of do the clock. Always. For sure. I was an engineer at Veritas when I started there.

And I had this lunch meeting with Mark. He doesn't even remember. It's one of those meetings that I remember. By the way, there are often meetings in your life. We talk about this a lot where you as the recipient of that meeting, remember it as if it were yesterday. And the person who's dispensing the advice doesn't ever remember that they even had the meeting, right? That happens a lot.

So we go out to lunch and Mark was talking to me about what do I want to do in my career. I said, I wanted to run a company someday. And he said, you don't know what you don't know about running a company. you need to know how to manage and you need to know how to sell. I was an engineer, didn't know anything about sales, nothing. Like, I wrote code, that was it. And I had no idea how money came in, who was a customer, nothing. So Mark said, well, why don't you try sales? So I'm like, all right, whatever, I'll try sales. I had no idea that I could be persistent or any of this. And so I would go out and go to all these crazy places around the world to go get orders. And I actually got a lot. And the key was

I was more afraid to come back without an order than to go sit at a customer's say. And Mark would set it up where he would say, like, don't come back until you have an order. He didn't even say I'll be really upset, but I refused to come back because I knew people would be more upset when I came back than just sitting there at the customer site. So I literally, when I would go to customer, I swear that this is what happened. Customer would often ask, well, when's your flight back? When are you going home? I'm like, I'm not going back until I get the order.

And I was serious. I would sit there for weeks. Every day I'd show up and sit in the cafeteria. I'd chase people into the bathroom because I was more afraid to come back with the wrath of Mark Leslie. Like, where's the order? So I would just sit there until something happened. It actually worked. I mean, that was kind of my...

So let me tell. The NCR story, which is like all these stories. So we're at the end of the quarter. And we've got to get this deal done out of South Carolina. You know, young new salesman. and we have this conference call on a Friday afternoon. He says, yeah, it's all set up. We're getting into the deal.

And I said, like, we don't have an order here. Like, I don't know why you think there is, but there's no order here. So I said, you need to be there Monday morning when, you know, when business opens over there. And you need to go and find out what's going on because we don't have an order. And Wednesday is the end of the quarter. So we're kind of like up against it over here. Right. I was going to fly back to San Francisco on Friday.

And I said, you can go anywhere you want. But Monday morning, you got to be over there. And don't come home without the order. So he's sitting in the lobby over there, right? He's a fixture. And Monday goes by and no one will see him. And Tuesday goes by and no one will see him. And then the VP of sales walks out and he goes into the men's room.

And Peter follows him into the men's room and says, Russ, you're sales guy. You got to help me. I'm dying over here. I got to go see somebody and you help me. So he did. And then we got in and we closed the quarter successfully. It was great. And it was a great learning experience for Peter, right?

Yeah, yeah. We did this big deal with Microsoft, and it took months and months and months. I mean, to where I basically lived in this guy's office. Every day I'd show up and sit in his office in a white chair. And I remember one of those recline, kind of 80s reclining chairs. And I sat there for months, and every day I'd show up. And I'd be there, get him coffee, whatever, and he'd kind of shepherd me through, I swear. And it became such a joke that after we did the deal and he left Microsoft, he actually sent me the chair. because he said this, he said, no one has sat in this chair more than you have in its entire life. Peter was a fearless warrior for the company. We ran into a very, you know, difficult problem the quarter after we went public.

And we were kind of stretching for where can we get some business. And it turns out there was an account in the UK that was scheduled to do something in the following quarter. And if we give them a nice discount, we can bring it into this quarter. And so we're sitting in a staff meeting, the executives, and we call it. Peter and said, you know what's going on. We're like in trouble, right? He says, yeah, we were in a lot of trouble and it was our first quarter of the public company. It's a real dark day for the company. And we said, yeah, so we understand this deal over there. Do you think we could go close a deal? Is it a $250K deal? Can we get $175K if we do this quarter? And he says, well, I think so.

I said, do you have your passport with here? He said, yes. Now, he's wearing flip-flops, short pants, a dirty t-shirt. And I said, listen, take your passport, drive to the airport. We'll have a ticket waiting for you. and you go to UK and get a deal. And so he says, okay. And he gets in the car and drives, and while he's in the car, he takes out his cell phone, and he calls out the guy on the other side. He says, I'm coming to do a deal.

I have no place to sleep. I have no clothes and no toiletries. Can you help me out? Actually, when I got to customs at Heathrow, they asked me where my bags were, and I'm like, I don't have any. I almost got, like, arrested because I'm on a mission. It's these stories that live on forever and ever,

at least for me. and I know in an environment, they really do define kind of a lot of how you go make things happen. Not unlike the military. People talk about it in the military. You kind of take care of each other. In business, and all startups, they're dark days. And the companies that come through that together

and survive and thrive after that, have those memories. And those are very powerful binding forces among the people who were involved at that time. Every company goes through some cathartic event, right, where it's the pit of despair, right? Like, nothing can go well, and the companies that pull out of that actually come out much stronger as a result.

It is not a straight line up and to the right by any stretch. And that gets to the topic of loyalty and commitment to a team. And I know loyalty and commitment to a team is paramount when you're in the service and in the military. So how does that transcend into a company

and what does that actually mean? How do you build that in an organization? I think you engender loyalty by being loyal first. I think you engender trust by trusting first. Some people don't like to trust because they might get betrayed. And I always looked and say, you know, if you go first and you trust, and somewhere along the way that trust is betrayed, you have to weigh that cost against the benefit of having expressed trust to people before.

So one of the things we did at Veritas, we were highly transparent. We used to have a company meeting, and we told them, you know, these are the good things, these are the bad things. I remember the company grew, we got public, you know, we had limitations on what we could do, and we're sitting and kind of talking about this problem of kind of expressing trust and sharing information. And we had 5,000 employees at the time. And I said, hey, why don't we, this staff meeting that we have, why don't once a month let every manager in the world

have a call in number and listen to what we talk about? Because right now, you close the door and everybody stands outside waiting for a little puff of white smoke to come out of chimney, right? So we did that. One of the questions you asked yourself in a company, you run a company, should we tell people this? Is this something we should talk about?

And we actually changed that question and said, is there a good reason why we shouldn't talk about that? Is there any good reason why we shouldn't tell people? And that bought a lot of loyalty. Now, the other part of buying loyalty is success. People are much more loyal to successful companies than to unsuccessful companies. But the importance of building trust, I think of trust. I think of it as a bank of trust.

So in a bank of trust, you can make a deposit, meaning you can express trust and give people that sense. In times of need, when things are bad and you need people to stand by you, you can make a withdrawal from that bank. But they don't make any loans. So if you don't make a deposit, there's nothing there when you go to the bank. And that's the way I think about it

in terms of running a company. I think leadership is authenticity, loyalty, trust, honoring people, fair play in all things, meaning compensation and stock options and stuff like that. Everybody understands the rules and then you abide by the rules. That doesn't mean everybody gets to.

the same amount of money, but everybody gets treated in the same paradigm, right? And all that responsibility falls on the senior people in a company to do that. Every day, culture in a company has nothing to do with the values that are published. Culture in a company has to do with what happens in a company when things get bad and people have to make decisions and how do they react. And what they do in those days determines what that company's character is. So when you think back to your career, is there a moment that you remember on a leadership challenge, how you addressed it and what you learned from it? There is a moment I think of, and it's actually part of that same story that I told a little earlier.

I was away from the office on a Friday in February of our first quarter as a public company, and I was with my aunt and uncle who had come to town from the East Coast and my wife, and we were up in Point Reyes, and it's very beautiful. And we didn't have email then. I'm calling in all the time to get my voicemail, and then I get a voicemail is this. Sequent computers canceled their $350,000 order, which was a development order that we had been working on for a year,

and we were taking it to revenue in the current quarter, and they canceled it. Our goal for that quarter was about $2.5 million. So it was a big hit. It was a 15% hit to the quarter. And you can't make the quarter. You've got to exceed the quarter with a little company at the time, and public.

So the rest of the day, I kept calling in for more news, and there wasn't any. I kept calling in a few since maybe something good happened. There was no good news. And the rest of the day, I'm walking around with a rock in my stomach. And my wife and my aunt and my uncle are all talking to each other. And I'm living in a silent movie. I have no idea what's going on.

So they had the weekend, and I wasn't in the office. And it gave me time to think about it in a way. And I said, this is a leadership opportunity. And I came in the office, and the first thing I said was, we deserve to get canceled. This isn't the executive staff. We deserve to get canceled. We did a terrible job.

And we need to figure out what we did wrong and how to make it right. But I don't want to do that right now because I don't want to go fix the blame. I want to actually do a post-mortem. Let's do that in a month. So we kind of took that off the table. And then I said, we got a $350,000 holds. Anybody have an idea? And the room did look just like this.

Everybody's looking at me and nobody has an idea. And I said, I have an idea. I said, my idea is we go ask sequin for $100,000. And everybody's kind of like, ah. And I said, so three things. I said, first, we give them a clean release, which has value to them. Second, we understand that there's guilt on both sides when something fails. So, you know, we don't necessarily, you know, do anything with that.

But we make sure that, you know, we understand that there's failure on both sides. And I said, the last thing we do is we beg for mercy. We go up there and we say, hey, we're a brand new company. it's our first quarter, give us $100,000. You remember when you were a young company, it will save our life. And we go get on our knees and we beg. And there ain't nothing wrong with that

when you're in business is doing the right thing for your company. And then we did the Peter thing, and then we did the other things. And it was a moment in time, at 8 o'clock in the morning, it was black. There was no hope. It was all despair.

And we came through that, and that team remembers that day and was a better team. and a more loyal team instead of a tragedy for the company. So that was a leadership moment for me. My question was a little bit in response to both of the last discussion you all are having on loyalty, but specifically on incentives and incentives around sales organizations. Specifically, how do you structure incentives such that your sales organization is optimally competing outside rather than inside and making sure it's not cannibalizing profits that could have been had?

How do you think about incentives in general to maximize the, overall company gain? Sales incentives are usually, you know, kind of structured economically. You make your goal, you get this much. And once you pass that, you get an accelerator and stuff like that. And the question is, are they behaving right? Okay. And the reason that salespeople don't behave right relative to the compensation plan, it's not the salesman, it's the compensation plan. What a company needs to do is find out what they want the salespeople to do and then pay them for that. and to do that in a way that is simple. So I'll give you an example.

I was on the board of the SaaS company, and we have all kinds of sales plans, and finally one day I said, look, the most important thing that we measure ourselves and the world measures on is ARR, an annual recurring revenue, or MRR monthly recurring revenue. I said, why don't we just pay for that?

Why don't we give each person a territory and said, on the exit date last year, the ARR from this territory is $1.7 million. your job is to get to $2.7 million. If you lose something along the way, it's on you. Go figure it out. And you pay very simply on the thing that's most important to the company. So the problem that most companies have is that they don't know what's important to them.

And then the second problem that most companies have is that everybody, particularly as a company gets larger, everybody, you know, has a hobby horse that they wanted salespeople, they wanted to do this, they wanted to sell this new product, they want to do it. It's incumbent upon the people who are in charge. to have clarity of thinking and to express that in the compensation plan. I think a compensation plan should be on a three-by-five card. This is what your base is. This is how much you're getting.

These are the kind of notches as you go up the thing. And here's what we're paying for. Go to work. Had a very interesting little side story. Sun Microsystems was a very big company with a very big sales force. And every year they had a new compensation plan. And every year they worried about like, what are the holes in it that we can't see?

and what are the unintended consequences? So they got their five top salesmen in the world, and they brought him into the home office. And I said, the guy who breaks the compensation plan most significantly gets a gold Rolex. They worked. They found out all the holes in the plan. It's good. So in the past, you've talked about the idea that being the CEO or founder is not necessarily glamorous,

and that you used to have to wake up at 2.30 in the morning to go to, to do your media call for the East Coast and all that. But when you're fighting for sales talent specifically, you kind of need to show up a little bit of the glamorous side. How did you navigate those two of kind of showing that this might not be the most glamorous thing, but sales talent are kind of looking to be a little glamorous at times? Salespeople love to get sold too. So I actually understand success in sales,

having been through the whole thing myself. It's a very simple thing. The most successful people go to work for a company whose product people want to buy. The second thing they do is they get a great territory. The third thing they do is walk around, you know, kind of talking about how bad things are so that they get a great quota. And then the rest of what they do is the things they do every day, which if you've done the first three, it's a layup. You know, you just got, you just do it, right? You just roll it up and you do it.

So salespeople want to feel like you got a hot product in a hot market. They want to feel like they're going to make a lot of money. They want to feel like they can hit the million dollar mark. One of the things, you know, as Salesforce is kind of get a little bigger, one of the things you think about is what percentage of the people do we expect to make goals. So the company knows what the productivity is. And they know what the mean in the median and they know all this. It's my belief that you want to have a company where 75%

of people get to 100%. Then you have a reputation. This is a company where people make money. A lot of people say, well, you know, let's have, let's get everybody stretched goals. You already stretch goals. Everybody walks away, you know, only 30% of the people make it. And then you got a downer, right? You build a culture of success by managing these things.

You manage the environment. Certainly when you start in the very beginning, I have a belief that you look for, there's most salespeople are what we call coin operated. You hire them. You give them all the materials and the territory and all this other stuff, and then they send you orders. The more they send you, the more you pay them. And I consider that to be the infantry, to translate it to you guys. You do it with process and procedure and rules and regulations and stuff like that.

But when you're just starting out, you want Delta Force. You want resourceful people who have minimal resources and can react in a way and can pull other people in a company and can do amazing things that you can't, that you don't. You know, a big Salesforce is a sales factory, like the infantry is a fighting factory, right? But little Salesforce is really a bunch of very, very special and unique people. Okay, with that, thanks, Mark. Okay, that was awesome.