Avinoam Nowogrodski - Co-Founder & former CEO, Clarizen
Clarizen was founded in 2005 by serial entrepreneur Avinoam Nowogrodski and Tanya Epstein. As a leading cloud project management platform, Clarizen has more than 2,000 enterprise customers and 100,000 individual users in 79 countries. After raising $90 million, the company was acquired by the private investment firm K1 in 2018.
On the importance of sales for startups and the role of the founder:
Sales is the hub for everything. From sales, you can derive product plans, your roadmap, marketing messages, what’s unique and valuable about your product, and what you still need to work on... everything.
A founder needs to push the entire company to work against gravity. By gravity, I mean the tendency to focus primarily on a specific technology and its features. Most founders first develop a technology and then set about finding customers for it. Eventually, because they don’t know what their customers actually want, they end up doing a lot of customization for every single one--a complete waste of time. So I do it the other way around: I start to sell as early as possible. By selling to customers, I get to understand them, their use cases, and their people, and can develop my technology accordingly.
The founder’s role is to cross the chasm, to create the demand for the company’s product. The role of the sales organization is to fulfill the demand, to evolve, improve and refine the sales processes in order to scale what the founder has created.
On the benefits of customer focus for sales:
Only if you understand the customer’s use case, you are able to articulate the benefits of your solution in terms of improving what the customer is doing today, instead of what they will be doing with your product.
Nothing opens customers’ doors faster than examples of other customers who are getting value out of your product. That’s a chicken-and-egg problem in the beginning, so get creative about it! At Clarizen, for example, we’ve given discounts for customer endorsements, or made a common press release or testimonial video part of our contracts. Because customers love to hear about others’ use cases, I also regularly invite a group of them to lunches where they can share what they do with our product--and I bring journalists along who write up an article about this. But our most successful format are our “Champions’ Meetings”: we fly out our customers to a meeting where they present to each other what they did with Clarizen. In the end, they receive a “Champion’s Certificate”. Our customers love it so much, they even pay to participate!
On the transition from founder sales to professional sales:
For the first sales hire, the first attribute that comes to mind is “hands-on”. The person needs to be a hunter, keen on closing deals. He or she needs the energy to push sales to a different level, to get things done. That’s why it’s impossible to bring someone from SAP’s or Oracle’s management into the job. These people are great at building dashboards--but in a startup, there’s nothing yet to show!
How you need to distribute your resources in the beginning entirely depends on your objectives at the time. Some new businesses grow almost naturally, and so you might need to focus on customer success and don’t invest anything in sales. But if sales activities are responsible for a big push forward: do the opposite and grow your sales team!
On large sales organizations:
I’ve led sales operations of more than 100 people. These large organizations include the whole 9 yards:
At the top management level, you have the Chief Revenue Officer, the VP of Sales, VP of Marketing, VP of Customer Success, and the VP of Professional Services (if needed).
Under the VP of Sales, you have the Director of Sales Operations. Their role is to monitor and optimize the sales playbook all the time, so the sales people are equipped to close deals as quickly as possible. For example, if the sales people are doing a great job pushing deals forward, but start working on the legal matters too late, the deals might slip to the next quarter--and that’s a disaster!
Finally, you have the direct sales people, the inside sales people and their team leaders, who are also supported by the SDRs.
On compensation plans:
Building a compensation plan is an art--but it’s at the base of every sales organization. I have 4 basic recommendations:
Base your plan on individual compensation and avoid group compensation. Any kind of group compensation is counterproductive to your sales people’s success.
Make sure that your sales people need to achieve or overachieve their numbers to make their salary. I recommend to use 60% base salary + 40% commissions with an additional accelerator: at 150% of your quota, you get 200% of your salary. Limit the accelerator to 150-200%--if your people exceed this, you have simply set your quotas too low.
Set your quotas and pay out commissions quarterly, or even better, monthly, to keep everyone busy all the time. You’ll see that in the final two weeks of the quarter, all the deals will be closed. If your dealflow allows for doing it monthly, that’s a big advantage for your startup!
Compensate everyone in the organization based on specific metrics, not just the direct sales people. For example, you can compensate your SDRs based on SQL (Sales Qualified Leads) targets, your Professional Services people on billable hours (which should be at 60-70%), and your Customer Success people based on the churn rate or the expansion rate.
Avinoam’s advice to founders:
Your job as founder and CEO is to create alignment between all the parts in the company that contribute to its success. That’s easier than it sounds. More often than not, trying to create alignment is like stacking pencils on their tips.
Failures are the best tool to make progress. Successfully going through the process of understanding why you were failing is the most important skill of an entrepreneur. So don’t avoid failure, don’t ignore it, don’t deny it--embrace it!
As a young founder, I used to think of myself as super-confident. But in retrospect, I was just focused on establishing that I knew everything--that I was right. Then I sold my startup to Dassault, and starting working closely with the company’s CEO, a very experienced guy. That’s when, for the first time, I discovered the Planet of Modesty. I figured out that confidence is built not from knowing it all, but from testing the limits of my knowledge. Today, I base my confidence on my ability to learn, my passion, my curiosity--not on the knowledge I already have.