Early Stage Sales with Matt Ekstrom

A few weeks ago, I launched the first session of a monthly Company Building webinar series for founders and operators of developer-focused and/or commercial open source startups. The goal of this series is to share tactical knowledge -- the nitty gritty know-hows that can make the grinding experience of company building a little easier for entrepreneurs -- from experienced operators who are still in the game (stay tuned for the announcement of the second session, happening in early March).

The topic of this session is early-stage sales, which is a common struggle I see among many founding teams. The expert panelist is Matt Ekstrom, Chief Revenue Office at ArangoDB. He also served in senior sales roles at ScyllaDB, MongoDB, and Synopsys, having spent 20 years doing enterprise sales in Silicon Valley.

To make our wide-ranging conversation more useful and digestible, I edited and condensed the session’s transcript into the five themes:

• When to Start Selling?
• Building a Sales Machine: Roles, KPIs, Quotas
• Stringent POC (proof of concept) Requirements
• Servant Sales, Evidence of Work, Fire Fast
• Global Opportunities

When to Start Selling?

Kevin: I think you have a very elegant framework for knowing when to start selling. I think it's actually kind of hard to tell, especially if you're building a commercial open source company from an open source project that is by definition free and open to be used by anybody in the world. How do you know when there's now an opportunity to sell something?

Matt: Yeah, I think that there's a critical mass point in enterprise open source.

It doesn't matter if it's Redis, it doesn't matter if it's Kafka, you can go to those websites, you can download that software. It's absolutely free. There are no restrictions on how you download it. And the problem for account executives, problem for sales, is it's totally free. So how do you convert those free licenses to enterprise licenses?

There are three things. Is it mission critical? Is it tied to revenue? Is it customer facing?

Kevin: How can you tell? Is that something you tell your account executives to figure out, or is this kind of like a company wide thing to really have to work hard to understand how your free users are using your open source tech.

Matt: The amount of research that is required comes primarily from SDRs. So it's demand gen. It's the SDRs that are going out and talking to people, talking to the leads and kind of discovering how big of an opportunity is there actually. It's quite hard to be honest. But just by making the calls, doing the prospecting, you eventually find out, okay, this could be a potentially huge opportunity.

Building a Sales Machine: Roles, KPIs, Quotas

Kevin: So for those in our audience who may be super new to sales in general, what is an SDR? What is an AE? And what is their relationship with each other in a team. I know this is second nature to you. But I want to make sure everybody else understands what those acronyms are even supposed to mean.

Matt: SDR is a sales development rep. So this is somebody who follows up on leads. We get leads every day. People download white papers, people download training, they join trainings, free training, and the SDRs follow up on those.

And typically we find new opportunities based on, like they download the white paper, why did they download the white paper? They have a use case in mind. All of a sudden it's revealed that it's a huge deployment. So that’s the sales development representatives. Account Executives or AEs, solution architects, these are all part of the standard go-to-market.

Kevin: Is account executive kind of somebody who's serving an existing customer? Is that how I can think about it that way? And the solution architect is the more technical side that works with these two other roles to make the whole sales machine work?

Matt: So typically an account executive in Silicon Valley carries a quota of about $1.2 million. That’s standard.  And it doesn't matter if you work at Confluent, or if you work at ScyllaDB, or if you work at Arango, 1.2 million is about what an account executive is expected to be able to produce for most companies that are in this space.

…

Kevin: I want to dig into team management a little bit. I think sales is obviously both an individual effort, but also a team effort. And some people are team contributors. Some people are laggers and don't do the work. I love to hear about some of the common KPIs or metrics that you assign and track to manage your SDRs, your AEs, you talked about the quota a little bit at 1.2 million for an AE. What are some other things you use to make sure people are doing the work, which I think is half the reason why a lot of companies don't do well because the people are just not doing the work.

Matt: So SDRs are required to get 10 net new meetings per week. It is a qualified net new meeting. It's actually 10 inbound, five outbound. Outbounds are much harder. But they cannot reach their inbound bonus until they get their outbound. Because outbound is, it's the hardest thing to do. So we tie directly their bonus to the outbound effort.

So it's 15 total, 10 and five. And we review every week, the net new meetings. The account executives are required to send out a net new meeting report. That's tied to primarily success criteria. So we are an open source company.  As an open source company, the success criteria is key.

We do not close any deal unless we're doing a POC. So it's like an absolute requirement.

Stringent POC (proof of concept) Requirements

Kevin: How important is it to be very stringent with your POC requirements and success criteria?

Matt: Yeah. So the solutions architects must identify the success criteria.

We do not go into a POC unless we know specifically what the success criteria is. We don't know what it is. We don't bother. We would just reject the POC.

We need to have a goal. The goal is the success criteria. Typically with graph databases, it's tied to a query performance. And if we don't have that, if they're not willing to give it. We just don't even engage.

Kevin: I see. So if your prospective customer, you ask them for, what does success mean to you? Let's just say query performance as an example. And they're like, ah, I don't know. Or maybe this, maybe that but we're not being very clean or explicit about it, then that's a signal to you that maybe this is not a good prospect to pursue, and we rather not waste the resources to do the POC, right?

Matt: Absolutely. And with enterprise open source, that is a typical problem because it's free. You can just download it, you can use it. It's free. I mean like that's what enterprise open source is all about. It's about creating a critical mass of people that are using the software, but then eventually you can monetize that.

But before you get to that point, it can take years. It took MongoDB 10 years to IPO. It can be a long, long time before you can be successful with smaller companies like ArangoDB. You have to have these processes that I've put in place.

Servant Sales, Evidence of Work, Fire Fast

Kevin: How you make sure your team is doing this “servant sales” approach. Is that something you instill when you train them? And if so, how do you do it?

Matt: Absolutely. Servant sales, it's empowering them to get the biggest and most successful deployment of whatever open source product it is that you're selling. To the point where it ties to those three things that I brought up mission critical, tied to revenue, customer facing. Once you have one of these elements, you can convert a deal. It's easy by then, but it takes time to get to that point.

I would say to anybody that is trying to do a go-to-market, that is trying to give a quota, that you need to make sure that they can make their number. So in other words, if they're not making their number, if they're not making money, they're just going to quit.

It's a very tight labor market in Silicon Valley. So you want to make sure that they can get to their goal. You want to make sure that they can get to the number. All of the guys in my team got to their number. But I did that very selectively by making sure that they got accounts that I knew would convert. That I knew they were on our Slack channel. They were asking questions. I could just see the size of the deployment. I knew that they would eventually convert to paying customers. All these guys on my team, like they blew out their number. They made a lot of money.

It's really important by the way, because you need really good salespeople to build a successful company.

Kevin: On that point, Matt, when you hire somebody to be on your team, and he or she is not converting or not performing or not hitting their quota. What's your approach to handling that situation?

Does the person just leave anyways? So it kind of like is a moot point. Or do you fire them? Do you nurture them? I think there is a lot of mystique about the sales team culture, right?

Because founders who are listening will end up needing to manage people. All of these companies that we have on our webinar today, they're going to grow. They're going to have bigger teams.

Matt: So the recommendation I would give to anybody is to fire fast. If you think that somebody is not performing, just fire them.

It is a challenge. If you are European company, European companies have lots of laws that protect employees. So most people have like garden leave, you know, you fire somebody and they're still an employee for like six months.

But the truth is you should just fire fast. Anybody who's a manager knows intuitively. Whether somebody is performing or not. We came up with this term, I keep bringing it up to my boss. It's evidence of work. If somebody is actually doing their job, I can see evidence of work. And if I don't see that evidence of work. I just fired them.

It's a terrible thing to do. It's so hard to do because you know, it's a person, right? I mean, they have their job, their family, they're making money. But ultimately you have to make that decision. The nice thing about Silicon Valley is that there are tons of opportunities. So if I fire somebody, I know that they will get another job within a matter of days, it's really true.

This is why German companies come to Silicon Valley. This is why Israeli companies come to Silicon Valley. It's a really open labor market and it allows for these amazing startups to happen. It's really a model that works quite well.

Global Opportunities

Kevin: I want to zoom out to a global perspective, a lot of the folks on this call, they are companies that are founded either in the U.S. or outside the U.S. and playing to a global market. And you have had some really on-point experience having helped Scylla, which is Israeli, or started in Israel. Arango was started in Germany, to build up their Silicon Valley presence. Obviously they're gaining success in the US and other markets as well.

What are some learnings you've had so far in terms of building a global presence company? Does the company's national origin matter or not matter when it comes to the open source enterprise sales world?

Matt: I would say that it totally does not matter. I mean, if the technology does what it's supposed to do. It doesn't matter. It doesn't matter if you're a Chinese company, doesn't matter if you're a German company. Doesn't matter if you're an Israeli company. I know this because I’ve experienced it, anecdotally, so I know this for real.

For your participants in this meeting it's the same go-to-market. It is discipline around process. It is discipline around following up with leads.

If you believe that your product is capable of doing what it was supposed to do, then you can build a great business.

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