Entrepreneurial Team Building

Ed Sim at BeyondVC has an interesting post today on entrepreneurial team building addressing probably the most critical aspect of it …. namely the issue of  when to hire key executive roles and the notion of the overstacked early stage team. I like Ed’s thoughts on the overstacked team problem.

I cannot wait to see his assessment of when to hire the VP of Sales. In my experience, a pressure always exists to hire the VP of Sales fast … usually before the business model is baked and thus before the true sales model is understood. This is exactly wrong.

First, it is a lot costlier (from a true dollar and equity perspective as well as from a perspective of distracting the team) to move out a VP of Sales than to replace a few sales reps if your business model morphs from what you thought it would initially be and it turns out you hired the wrong person.

Second, the best sales leaders follow the money. In the early stage, your offering is risky and tough to sell, and the value is still largely unproven. The best sales VPs stay far away from these situations, so you will have an adverse selection problem where the person willing to take your VP of Sales job is not going to be good enough to sell your stuff.

Carol Bartz of Autodesk  one of the best software CEOs around, said in a recent podcast that she considers her role to be primiarly a sales role. When she goes to conferences and has to fill out her title, she puts down sales and not CEO or General Management. If she considers her responsibility to be sales with a company the size of Autodesk, then the CEO of any early stage startup should really be the VP of Sales until at least the points above are addressed adequately so that the right person can be hired for the right role. All of the other members of the team have a selling role too. Remember Jeff Parker’s rule #7 for entrepreneurs – most startups fail from a lack of revenue not poor cost controls.

The founding team of my current startup Kalivo has three members – a head of products & technology, a head of engineering, and the CEO. We are respectively responsible for requirements gathering and technology infrastructure, building and deploying, and sales, marketing & finance, and this will be the case for quite a while. Our next executive hire will be a VP of Sales, but I can assure you it will not happen soon. We will be doing a lot of market research, requirements gathering, building and selling before we hire that person. We will have customers before we hire our first sales rep, and we will have proven our value proposition to some level and have confidence in our business model before hiring the VP of Sales. If a founder with all of his passion and knowledge of a problem space and its solution cannot sell a product/service, then I highly doubt some outsider could do it better.

So, does the CEO have to fill the role of the VP of Sales on the founding team? Yes and no. Per Carol Bartz, the CEO is always selling the company, so like it or not, introverted or not, the CEO must be focused on sales. That said, if the CEO was primarily a product or technology person, then it may be appropriate to have a sales and marketing person as part of the founding team. In that case, the founding team may look like CEO, head of sales & marketing, and head of engineering. Note no COO exists in any of these cases …. why a COO would be needed to run a 10 person company is beyond my understanding.

— brian