This post is by Deborah Findling from SaaStr
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Episode 229: Manny Medina is the Founder & CEO @ Outreach, the market leading sales engagement platform that turns your team into a revenue-driving machine. To date, Manny has raised over $114m in funding from some great people including friends of the show in the form of Alex Clayton @ Spark, Mayfield, Trinity Ventures and DFJ Growth, just to name a few. Prior to founding Outreach, Manny spent 7 years with Microsoft where he ran the Latin America and Canada business development group for Microsoft’s emerging mobile division, representing $50M of yearly revenue. Before that Manny was a Senior Product Manager @ Amazon where he engineered the compensation system for Amazon Associates and Web-Services which accounts for 15% of Amazon’s traffic.In Today’s Episode We Discuss:
- How Manny made his way to found the leader in sales engagement from product management at Amazon Business Development @ Microsoft?
- How does Manny fundamentally approach managing top of funnel? What are the 2 big dangers of not managing it aggressively? What can be done to ensure not only full but high quality top of funnel?
- Why does Manny believe it is so important to track pipeline coverage as one of your core metrics? What does good look like when it comes to pipeline coverage? How does this change if you are creating vs in an existing market? How does Manny think about specialization within the sales function? Why are SDR’s 99% of the time not able to carry leads to completion?
- How does Manny think about quota construction today? Does Manny err on the side of setting high to be ambitious or setting low to increase confidence? How can managers really empower their reps to be aggressive in hitting their quota and exceeding it? How does Manny think about resource allocation on the individual rep level? What is sufficient? What is excessive?
- Does Manny believe that the founder should always be responsible for selling their product at one moment in time? How did Manny sell the first $1m in ARR simply through walking the streets of SOMA and selling door-to-door? What were his biggest lessons from doing this? Why does Manny believe that you should not have a VP before $5m?
Episode 230: We live in a Shark Tank world: competition is fierce, talent is better than ever, and we’re all striving to come out on top. CEOs everywhere are seeking to innovate, but 81% say their teams are not equipped to meet the challenges needed to compete in today’s marketplace. Innovation is about empathy with your customers. It’s all about customer obsession! In this session, Sandy Carter, AWS Vice President will hone your superpower – not of customer focus, or customer driven, but customer obsessed.SaaStr’s Founder’s Favorites Series features one of SaaStr Annual’s best of the best sessions that you might have missed. This podcast is an excerpt of Sandy’s session at SaaStr Annual 2019. Missed the session? Here’s what Sandy talks about:
- How to start with success and think backwards
- Think about how to present a feature or product before you start building.
Sandy Carter Below, we’ve shared the full transcript of Harry’s interview with Manny Medina. Harry Stebbings: Hello, and welcome back to the official SaaStr Podcast with me, Harry Stebbings. It’d be awesome to hear your thoughts and feedback on the show on Instagram. You can find me there @HStebbings1996 with two Bs. I answer all messages myself personally, and I would love to hear your thoughts on how we can improve. Harry Stebbings: But to the episode today. I always write this very detailed and diligent schedule, but for the first time I think ever, the conversation today was so fascinating, I threw it out of the window in the first three minutes, and we just had this fascinating discussion. Harry Stebbings: So with that, I’m thrilled to welcome Manny Medina, founder and CEO at Outreach.io, the market-leading sales engagement platform that turns your team into a revenue driving machine. To date, Manny’s raised over $114 million in funding from some great people, including friends of the show in the form of Alex Clayton at Spark, Mayfield, Trinity Ventures, and DFJ Growth, just to name a few. Harry Stebbings: Prior to founding Outreach, Manny spent seven years with Microsoft, where he ran the Latin America and Canada business development group for Microsoft’s emerging mobile division, representing 50 million dollars of yearly revenue. Before that, Manny was a senior product manager at Amazon, where he engineered the compensation system for Amazon associates and web services, which now accounts for 15% of Amazon’s traffic. Harry Stebbings: I do also have to say a huge thank you to a dear friend of the show in the form of Alex Clayton at Spark. I so appreciate your questions, my friend, and mojitos on me for that. Harry Stebbings: But you’ve heard quite enough of me, so now I’m very, very excited to hand over to Manny Medina, founder and CEO at Outreach.io. Harry Stebbings: Manny, it’s absolutely fantastic to have you on the show today. As I said, I’ve heard so many great things from Alex at Spark, so thank you so much for joining me today. Manny Medina: No, it’s great. I’m glad to be here. Thanks for having me. Harry Stebbings: I would, though, love to start, Manny, with a little bit about you. So tell me, how did you make your way into what I’ve come to love in the world of SaaS and really be one of the leaders in the world of sales engagement with the founding of Outreach? Manny Medina: Well, we started Outreach because we were running out of cash in our previous company. We did the math, and we figured that if we were able to get our reps to perform by booking 10x more meetings than they would have been in the past, that we would actually dig ourselves out, that we would generate enough cash to get back on our feet. So we decided to go ahead and build that, and we built a workflow that generated 10x more meetings for our reps. Manny Medina: Our reps were so excited, and as we were going to those meetings, the people holding those meetings would ask, “What’s your special sauce? What’s your special power?” And the reps would immediately talk about how we built this workflow that allows us to book their month 10x more meetings. People would immediately stop and be like, “I don’t want to buy your service. I want to buy that tool that you built internally.” After about 60 of those meetings, we realized that we had a pivot in our hands and that we needed to really go do that. Harry Stebbings: I love that. I’m too intrigued. I’ve just come out of fundraising for a fund, and often, people say the reason funds don’t raise is, because they can’t get the top of funnel full enough. When we apply that to the SaaS world, is that why businesses don’t succeed, because they can’t get top of funnel full enough? How does that kind of relate to actually conversion? Because you can fill top of funnel and not convert. How do you think about the balance between the two? Manny Medina: So from my own experience, and I can only speak to that–I’m not a VC and I don’t have a portfolio per se–but from my own experience and from seeing our customers, what I can tell you is that, if you don’t manage the top of funnel aggressively, you will either not have enough to feed the team or your revenue will be choppy. This is for two reasons. Manny Medina: One is there’s a number that we track internally and many high performance [inaudible 00:05:49] track it internally, which is pipeline coverage, meaning how much pipeline do you have to cover the number that you’re trying to hit? It varies depending on how well you’re doing in the market. So if it’s a new market where you’re still educating the market like us, you need anywhere between three to five pipeline coverage to have somewhere in the range of 90% certainty you’re going to hit the number. Manny Medina: If you are a company which you’re dominating the market and it’s mostly you’re going in and you’re placing a solution, or your people are overtaking, you don’t need more than two, maybe less than that. So for instance, a company like Instructure that has a stronghold in the allocation market, they run a less than 2x pipeline coverage. It varies widely between, and that coverage comes from being very deliberate about how you manage your top of funnel. Manny Medina: The second piece I run that is that at the rep level, managing your top of funnel and managing at least you’re stewarding, your book of accounts, will allow you to be very recurrent in hitting your number. So there is something that we spoke about, about two to three years ago that we call the [inaudible 00:06:48] of sales. That’s a concept that Mark Casaglow, our VP in sales[inaudible 00:06:52]. Manny Medina: When you are a rep, you begin your life building funnel and then as the funnel gets build you start switching your attention from building funnel to closing that funnel that you built. That you are very excited, that you can see money coming through, you can see your commission checks clearing, you can see all sorts of vacation, and assets that you are buying giving the new source of income, but you stop minding the building of the funnel again. You can see that the oscillation from closing back down to prospecting again and then that will take a little bit to build a funnel, and then you are back to closing and forgetting that you have to build funnel and so on, so forth. Manny Medina: For as you as a rep, to sort of have some kind of recurrence and the generation of your commission and the generation of your business, you need to be able to manage both. You need to be able to store your pipeline as well as close it. Does that make sense? Harry Stebbings: It does absolutely make sense. But kind of hearing about the oscillation between the building and then transition to selling, by converting actually bringing dollars in, I do think about the kind of specialization of sales and the whole “why isn’t that rep focused purely on consistently building and then passing over the highest quality warmest leads to the kind of closing sales rep.” How do you think about the specialization of sales? So, actually they don’t have to transition between the two and they can consistently focus on that specific function. Manny Medina: So broad specialization is a bit of a catch all and a big bag of thing. You can take two very successful sales leaders, and you will get a different answer for that. You can take somebody like, Lars Neilson and he will tell you that roles should absolutely be at specialized. Then he would have a very good crafting that his job is to open doors and get appointments. Manny Medina: Then you can ask someone like, Carlos Delatorre from Mongo, he uses pipeline generation that’s core function to his AEs. There are pros and cons for each. Pros for specialization clearly makes sense, but you have enough resources specializes in that very narrow set of activities and then again very good and then they’re getting very good at it. The problem is though, that SDR tend to be younger and less experienced and unable to carry conversations to the highest level. Even though you may be very good at opening doors, you may not be as good as opening the right door. You may need to put in more effort to get the same result. Manny Medina: This is a question mark. This is why there is no silver bullets in sales. You have to just try it in your environment and see what works with your product, your people, and your customer types. If you ask Carlos, he would argue that a seller needs to be a hunter by definition. A seller who doesn’t prospect is of no use to him. You can argue that a seller that is very experienced and gets a book of business. For instance, if you were to look at the traditional industry like, financial services for instance, they’re given territories and they get dropped into a city and they ask “Hey, you get a phone book?”. Then you deliver a number at the end of the year. Manny Medina: So at that point, you are prospecting, you’re maintaining, you’re closing, you’re expanding, you’re renewing, etc. The sales motion will depend on the sort of the efficient boundary of activity and results of whatever industry you’re selling into. Harry Stebbings: Can I ask you, you said the word close to that, and you actually just now said the word “results”. I am always fascinated by quota construction and how to construct a quota that is ambitious enough that really moves a business forward in terms of trajectory. Also, it’s not too ambitious that if it’s not hit, which it likely won’t be if it’s too ambitious, it won’t deject the team. How do you balance between ambition and then not be building a dejected work force if they don’t hit it? Manny Medina: I am glad that you ask me that question in the beginning of the podcast because I have a very nuanced view on this that is kind of a long story. I will get it[crosstalk 00:10:11]. Manny Medina: One of my north stars in this business, is a gentleman by the name of Steve Walsky. If Steve Walsky was the chairman and CEO of a company called, PTC, Parametric Technology Corporation. PTC is sort of the source of some of the greatest sales minds of this age, at least in BTB SaaS. Steve Walsky taught me the following lesson. There is two numbers that are relevant in your business. One is more relevant than the other, so you have the quota number. The quota number is a number that tells the rep that you get to play another round. It’s quota number, is a number that the rep needs to clear to remain in the business and continue to work here, if you would. Manny Medina: The problem with the quota number is that the quota number has a very high impact on your psychology and mentality. In his view, and I subscribe to this, you want to set your quota low. The rep clears a quota early in the quarter or early in whatever period you are measuring. So that he can change his behavior and have a bit of different spring in his step and feel like a winner every time he’s walking into accounting because he already cleared quota. He has nothing to lose, he’s now here for the joy of the game. Manny Medina: What he manages against, is not the quota, what he manages against is the average rep production. That is the number you want to make monotonically go up into the right. What you do is, you look at across your reps and see what numbers are they hitting. Take the average of that and draw a line, see who falls below that, and work those people up. Continually do so and the ones that don’t work out, you will see out. That way you achieve two things. Manny Medina: One, you achieve the ability to increase rep efficiency and production without having the bearing of the quota on their head that makes them feel like time is running out on them. Does that make sense? Harry Stebbings: It totally makes sense. I do have two subsequent questions for you from that. One, you said about kind of working them out. Does that not build a culture of almost fear if one fails to hit their numbers or fear of not making it, so to speak? How do you think about that and approaching that with a team and morale at the center? Manny Medina: That’s a great question. The question is “How do you handle that?” Hopefully you have an organization in which you have understood the factors that go into diagnosing and troubleshooting reps’ performance. That’s when, building the pipeline. Is it managing your pipeline? Is it closing? Is it understanding the product? Is it your book of accounts? Is it your territory? There’s a several factors that play into that. My preference is to make sure that the rep understands that they own their own business. They have levers to pull for their business such as: marketing, or events, or demand gen, or SDR support. Things that can support either creating a pipeline or engaging with more people in their accounts. Manny Medina: The rep, at the end of the day, will be the quarterback and the owner of that will sort mini p&l, if you would. As long as you’re giving the resources and you’re explaining to them “how do you manage the resources”, you hope that the coaching and training that you give them is enough to continue to have them perform at or above average. Harry Stebbings: You said about kind of the resources that allow them to really fulfill that potential. [crosstalk 00:13:09] Manny Medina: Right. Harry Stebbings: In terms of resources at the rep level, how do you feel think about resource allocation without maybe being too generous to allow them to use too many resources to hit what they should be hitting with less? Manny Medina: That’s a great question. Frankly, this is a bit of both an art and a science. If you get too generous then your unit economics may go sideways. If you don’t get too generous you may force a rep that would otherwise be a great performer or get a region that otherwise would be a great region for you to not perform. Manny Medina: I think about this problem in sort of categories. M first problem is to make sure that you have enough capacity in a region to make sure that you get the return from that area. The second problem is then that you have to get the reps to production, to regular production automatically goes off. Once you have those nailed, and by the way, very few people actually even get to that on a regional basis. Manny Medina: Once you have capacity and production figured out on a regular basis, then you can optimize. Then you can talk about driving efficiency. Efficiency is a journey, efficiency is not like one and done. Efficiency is sort of draw a frontier as to where you want to go and you tweak amount of investments you do via events, via sole prospecting, via SDR, via demand generation, via ABM. Whatever so that the tools you use to continue to keep that pipeline stocked, you have to dial it over time. It may change because you may change depending on your acceleration and will change depending on your brand recognition, it may change depending on all sorts of market dynamics. Manny Medina: For instance, for us, the unit economics for our business continually gets better as people know what sales engagement is. When we started two years ago, it was 100% education of sale, where we were absolutely calling outbound because inbound was never going to show up. If I got somebody on the phone, I was evangelizing. Now to this day, now we are seeing our fees, now we are seeing people switching, now we’re seeing people asking the right questions. That’s because the market is evolving as people get educated. So you are efficient for a tier of how you generate pipeline, so it changes over time. This is why there is no silver bullet so you just have to constantly test and see what works and constantly optimize based on your dynamics. Harry Stebbings: Can I ask, in terms of that education element up front that you had to go through, was that super tough for you given the longer sales cycle it takes when you first have to convince someone just of the value prop itself kind of being a new category you are creating? Was that tough and how do you explain that to the sales team who may be used to a faster cadence of closing and also to investors who may look at kind of slower at the beginning growth in numbers than they’re used to given the new category creation? How did you kind of approach that? Manny Medina: It is interesting because you have to navigate your adoption curve, sort of like the crossing of the chasm humps. You ave to navigate it incredibly carefully. At this point we are talking not just about selling but we are talking about company building. I always have to build a product and sell against a market that is ready to buy what I have to sell. At the very early of our reach, we were mostly tech. We sell to tech people. Matter of fact, the first million dollars of ARR came from me and a small team walking around Soma district in San Francisco selling door to door. That kind of evangelism, because what I had to sell people would not believe that it existed. I can only sell to other startups that were ready to take on risk and to whom I don’t look any different. Manny Medina: If I were to try to sell to AT&T, who is a customer now, AT&T in the US who’s a customer now, they actually walked me out the door of [inaudible 00:16:17]. They were like “yeah, we don’t need what you have”. They didn’t even know it was possible. What would you bet on four or five person start up? As you continue to grow, and the market continues to grow, then you can actually move to the early majority, if you would. Manny Medina: So [crosstalk 00:16:28] Harry Stebbings: [crosstalk 00:16:28] What was the sign you could transition from the startups in Soma who are willing to adopt the product early versus your AT&T? When do you know when it’s the right time to cross the chasm between early adopter to early majority, so to speak? Manny Medina: Funny enough, we haven’t crossed the chasm, so we are still very early in this category. We are still, so, just peeking into the early majority, just peeking into it. We haven’t gotten to it. We are still very tech heavy, if you would. Now the size of the tech company is a lot larger and now you are seeing sorta risk takers like Palo Alto Networks are buying and sort of setting the standard for everybody else. It’s still really early, so I can’t tell you how to tell because I haven’t gotten there yet, but I think there is some early indicators in terms of the quality of your inbound all of a sudden, A shows up and B is a little higher. Manny Medina: The quality of the conversations as you go to things like SaaStr, or Dreamforce, or AISP, or even [inaudible 00:17:20] etc. When you start going to these conferences and you see the quality of conversations that are evolving from like all I need are CRM to where are my reps going to live? What’s the engagement strategy going to look like? That’s when you start getting the feel for the market and the market is charting a little bit. Manny Medina: The other one, I was talking to a gentleman yesterday, Ariel Myers, who used to run Apollo and he was mentioning that he came into Apollo and immediately doubled the price. Nothing happened. That is a sign that the market is a little bit more ready than you otherwise would. There is other test that you can do. You can increase prices, you can sort of try to go off theirs. We had a motion that we called nights and weekends where we sold to mid market and commercial accounts. We were not, we were doubting that the loss to this account was going to turn out and then all of a sudden, that nights and weekends activities took over our regular activities because there was so much of it. Manny Medina: That’s the other way to do it and you can sort of carve out few hours from your week to try to sell to accounts you’re not supposed to or accounts that potentially may not be ready. When they start taking over your activities, then all of a sudden you know that, that a prosperous area of prospecting and sort of closing. Harry Stebbings: It’s hilarious I wrote a full schedule and I’m completely ignoring it because I’m so enjoying this conversation. I do have to go back to, you said about kind of walking around Soma and selling door to door. I was meeting a founder the other day, early stage SaaS founder, pitching for their seed round and I said to him “Have you been selling the products yourself?” They’re at 50K MRR. He looked and said “No no, we’ve got sales reps, no no, I don’t do the selling” For me I have this gut reaction of ooh, I think you should be doing the selling at some point. You are the founder whether it’s the first 20K of MRR or 100, whatever it is, but you should be doing – Harry Stebbings: Do you agree with that or am I missing a trick to think that the founder should always be at the forefront of the selling motion of some process of the journey? Manny Medina: I tell any founder that wants to talk to me that if you haven’t sold at least half a million dollars worth of your product to somebody then you’re not doing this right. I actually wouldn’t even take the call. That conversation would be over right there and then. Then, you’re not putting in the work. Manny Medina: There is a whole literature around product market validation and MVPs and product market fit and all that. I think a lot of it is overstated. Take your product, sell it. If you can sell it to a lot of people you’ve got fit. Then do it again. You know what I mean? So that fit evolves over time. It’s very simple. Harry Stebbings: I totally get you. I do love the simplicity of that. The other thing that I have to ask you about is the pricing. We touched on it there, in terms of pricing I’m always constantly challenged by the element of disincentivization in pricing. If you do seat based pricing people can share them, and there’s often sharing within organizations. If you do volume based pricing it discourages people from using the products. How do you think about the optimal pricing mechanisms used with the right variables? Manny Medina: So, that’s a great question. I’m not an expert, matter of fact we only have pretty much one seat price that varies with value. You’re talking to the wrong person here, but since you’ve got me on the phone and all, my take is that pricing needs to be, A simple, and B, it needs to encourage use. I don’t know, depending on the business that you’re in, for instance, we are in the business of generating engagement for rep. When a rep buys us immediately they need to see a pop in the amount of accounts are engaged, and eventually the number of meetings set and then that will translate into opportunity to close. Manny Medina: Throughout that entire journey it’s engagement. For me, charging per seat is the right way to go. Now, we did see abusers, we saw abusers when we were starting of people buying five seats and taking those seats and sharing them. We released this feature that actually bit us in the ass that would allow you to send from different email addresses. Mostly because we sold to a few agencies really early on and they were representing different customers. We let that feature run and we realized that users were taking that and turning a team of two into a team of ten by creating fake names and sending from all those names from different email addresses. Manny Medina: So that created a bit of abuse in the application. But actually that is good news, because that just shows that people need more of what you’ve got. So I wouldn’t take abuse per say as a problem. I would take it as sign of product market fit. You need to create more education around what it is you do so that more people know how to use it, and understand the value. Again, I see abuse as good news, because that means the people need what you have and you just need to package it and price it correctly and ship it. Harry Stebbings: Yep, no I totally agree with you. If they’re that keen to use it that they’re abusing it, it’s always a good sign. I do want to ask though to move into the quick fire round, Manny, so I’ll say a short statement and then you give me your immediate thoughts. About sixty seconds per one, are you ready to roll? Manny Medina: Let’s do it. Harry Stebbings: How does sales and prospecting evolve over the next ten years, Manny? Manny Medina: I think that you’re going to see activities removed from your day to day such as making sure your CRM is synced and remembering to follow up and making sure you take in the right next action based on what is important. The computer’s going to tell you what to do and the computer’s going to calculate in the background your efficiency, your capacity, and it’s going to give your management a number of how many more of you there is needed to hit a budget goal number. So it’s going to be very human and very automated at the same time. Harry Stebbings: How important is brand today in the world of Enterprise B2B? Manny Medina: I think it’s incredibly important given the amount of noise that is out there. I don’t know the answer to this question because we’re not a well known brand. We’re still very much into the street game of capturing hearts and minds on a city by city basis. I think in the future, it will be relevant, very relevant, but for now the board is exploding there is, it doesn’t take much to start a company. You have to go out and fight it out with other brands. Harry Stebbings: We spoke about founders and the importance of them selling there in the early days. When is the right time to hire your first VP of sales to you? Manny Medina: You only hire a VP of sales when you need to give somebody a title so that you can retain that person. You don’t hire anyone at the level of VP until you get to at least five million. You may have somebody leading your team, in my mind, but that person is selling as much as you are. There’s no such, the connotation of having a VP is that that person is sort of sitting back and managing the troops and nobody gets to just be a full time manager until you’re a very, until you’re in the grown stage of your company. That’s my take. Harry Stebbings: I love it. What would you most like to change in the world of SaaS today, Manny? Manny Medina: I would love for people to start going back to some first principles. Every year, every six months there is a new flavor of brown or black in terms of metrics or efficiency magic, magic form, magic ratio, magic this percentage of that. At the end of the day the unit economics and your user engagement with your application is really what will determine winners from losers. We need to stop talking about all these different ratios and economic indicators and talk about is the dog eating the dog food? Are people willing to pay for it and sticking around? I would love to see a bit more back to first principles thinking into how we think about SaaS. Harry Stebbings: But tell me, what do you know now that you wish you’d known at the beginning of your time with Outreach? Manny Medina: You have to quickly evolve as a leader. You have to quickly evolve from being driven by the next intervention to thinking in systems. For me, it was a bit of a few hard lessons of Manny you need to stop running and single handedly move things around or change things because you know how to do it. If you are building a company that will last and stand the test of time you need to be able to see the system for what it is and try to diagnose what is making the system do what it is doing. Harry Stebbings: Manny, as I said at the beginning, I heard so many great things from Alex. I’ve been super excited for this one for a long time so thank you so much for joining me today. Manny Medina: Thank you, thanks for the time. (Ding) Harry Stebbings: I mean what a hero and as I said the schedule completely went out the window there. I don’t think I asked one question off the schedule but it’s the sign of a brilliant interview for sure. If you’d like to see more from Manny you can find him on twitter @Medinism. Likewise it’d be great to see you behind the scenes here at SaaStr. You can find us on Instagram @HStebbings1996, really would be great to see you there. Harry Stebbings: As always I’m just so grateful for your support and I can’t wait to bring you another exceptional episode with Godard Abel of G2 Crowd next Monday. The post SaaStr Podcasts for the Week: May 3, 2019 appeared first on SaaStr.