Speaker 1Hey, folks. I'm Mark Roberge, and this is The Science of Scaling, a podcast about how to grow your revenue and sales. Today, we have Oliver Jay as our guest. OJ, as I call him, has been a friend for, gosh, probably about 15 or 20 years, and has taught me so much about a go-to-market motion and business model that I love, product-led growth. He's fortunate to be a very early sales executive at Dropbox and founding CRO at Asana, two of the best in PLG. And that's what we're going to dig in today, is how do you team up with an early-stage team and build the foundations for a successful product-led growth company? We'll talk about the early days, and we'll also talk about his more recent work, which studies why PLG companies with around $5 billion valuation tend to stall, while others break out to $20 billion or more. He calls it the PLG trap, and it's impactful, even if you're in the early days of growing your company. We'll get into those best practices and a whole lot more, so let's get into it. There's not a lot of people that have ran the sales org at two very famous unicorns, two very famous PLG unicorns. I know you're investing a lot of your time in giving back, and I know you're investing a lot of your time in giving back, and I know you're investing in something that you and I connect on. And I know part of that is you get a lot of calls from the next generation of startups to mentor their current sales leaders. What patterns do you see in them? Where are they at? How do you make them better? I'd love to unpack that.
Speaker 2Sure. I think there are some themes, for sure. As folks take on this role of CRO or VP sales, a lot of folks join companies as their first VP role in that Series B stage. So past product market fit, there's some momentum. There's some momentum. Usually there's like five to 10 AEs. And the reason why they've been hired is like, it's not scaling perfectly.
Speaker 1Yeah, they're not bringing a new sales leader in if things are crushing. So there's a little bit of cleanup work to happen.
Speaker 2Exactly. Exactly. So number one mistake I see is that people come in and they obviously they just run the Dropbox or Asana playbook, right? Yeah.
Speaker 1This is what I call the inappropriate cut and paste. Oh my God. And this is basically, you pick your person, board member, CEO, CRO, whatever. It's like, okay, I'm in this new company and I've got a decision. Which sales methodology do we use? Which demand gen channel do we pick? Which type of salespeople do we hire? What compensation plan do we use? And like, hey, I came from Asana. We are a five billion dollar business. I have the right answer. Let's use what they used. No, it's a different context. And what OJ's teasing out here context is like an evolution of where we are in the development of the tech stack and sales, et cetera. But it's more than that. This person's moved on to a company that's selling a different product to a different buyer. Let's start with that. So there is no universal best comp plan, best salesperson, best demand gen channel strategy. It's rooted in context. And so taking what you learned at some other business and just doing the exactly the same is usually wrong. All right, let's get back to OJ.
Speaker 2So for me, it's just learning. And I think every generation should look at the previous set of companies, not look for their playbooks, but look for their learnings. So all
Speaker 1of a sudden, one of your reports at Asana back in the day has now left and they got their shot, their CRO of supposedly the next unicorn. And maybe they spent most of their career at Asana. Maybe they had a great eight year run. And when they joined, they were 24. Now they're 32, right? It's like, that's all they've seen. They don't know what's Asana and sales best practices. And they don't know where it's going. And you have that foresight. So you bring that to them. But how? That is so embedded in their professional perspective. How do you get them to think
Speaker 2in that way? Yeah. When you are a VP or C-level leader, there is such a massive shift in your mindset. The first mindset shift really, even taking a step back, is the time in which you operate. When you're a line manager, you're planning six months out. So the decisions you're making now, right? Like you're hiring someone. You're hiring someone in AE. They're going to take on average six months to ramp, right? Three months for SMB, nine months for enterprise. So it's called six months to ramp. So you're making decisions today as if you're six months before six months later.
Speaker 1Yeah. Usually I'm just like the gears coming in and they come over and like, hey, good job last year. Your quota this year is like two and a half million. Your team's and that's how I'm thinking.
Speaker 2Yeah. Right. And so you're a leader. That's what you're planning ahead. If you're a manager of managers, I try to push people to think a year ahead. And if you're the VP, CRO, first big mindset shift I tell people is like your time horizon now needs to be two
Speaker 1years. This is hitting home for me right now. I'm going back right now to like 2010, running the HubSpot sales team. And we got to a point where I, the way I say it is I couldn't see around the house right now. I couldn't see two years from now. And I realized that if I didn't, I wouldn't recover. Like when I had the first 10 salespeople, if I forgot to do something, it was usually like it set me back a week. But when you're going from 50 to a hundred reps and you forgot to do something, it could set you back a year and you're cooked. So I love OJ's advice here. And for me, there's two things that were critical. Number one, I found an amazing mentor, John McMahon. He's board of flake, MongoDB at the time had a many of IPOs. The first one was PTC. And he helped me see around that corner two years out. So something to think about if you're in that seat. The other thing that I'm pulling out of OJ's commentary here is the importance of running some experiments on the side to unleash new growth opportunities before they're needed. Okay. So like you're coming into a year as a planning and all of a sudden you need to hit a growth, trajectory, and you want to go upstream. You better have run an experiment for at least six months of selling upstream before you commit to that. Or you have to go to channel. You better have experimented with channel partners for six months before you do that. Those are the things that are coming out on this point of OJ's, which is great. Which is like, that's a huge difference seeing two years out. Let's get back to his commentary.
Speaker 2Because they're used to, okay, instead of like just trying to hit my quota, they're like, okay, let me try to hit a longer time horizon. But now it's like, no, no, you've really have to stretch it out if you're going to be a company leader.
Speaker 1I'm just trying to channel the 32-year-old who spent eight years at Asana, ran that playbook beautifully, had the 50-person team, whatever, but was very like six-month oriented. And now you're like, hey, think two years ahead. And you're like, how? Like I'm literally coming into Series B company. I've got 10 reps. And it's like two years ahead, man. Like, okay, we've doubled and doubled or tripled and tripled. And that's the team too. Like, what do I have to think about? I've got the methodology, which is what we used at Asana. I've got the hiring profile, which is what we used at Asana. So my two-year plan is have 3X plus 3X down the road.
Speaker 2Yeah. That's not a plan. That could be the plan for your CFO to triple and triple. How are you going to get there? Hire 3X the reps. That could be. It all starts with what problem you're trying to solve for customers. So I ask, like, okay, two years from now, what problems, what types of problems and at what scale are you solving for customers and which ones? If you as a VP of sales or CRO, you don't have that answer, it's incumbent upon you now, because now you are a company officer to go and get that answer. Talk to the founder, talk to a VP of product, develop an opinion. At a minimum, you need to have an opinion. Ideally, that opinion is shared by the rest of the executive team about where that North star is, but let's just say two years from now. That conversation rarely happens because sales leaders coming from bottoms up, they're used to being given. The product team's like, hey, here you go. Here's your product. Go make hay, see what you can get. That is not C-level kind of behavior, where you just take something and you try to sell it. It's your job now to help the rest of the management team to actually make the best decisions possible so that two years from now, you have a great company. And part of that first question is like, what are we selling and to whom are we serving?
Speaker 1Isn't that brilliant right there? The difference between a sales exec and corporate exec. That is, that summarizes right there. Your first shot in the VP of sales seat, your first shot in the CRO seat. Congratulations. You are no longer a sales exec. You're a corporate exec. Your most important team is the executive team, not the sales team. I think that's beautifully summarized by OJ. It brings me back to Halligan year two. He sat me down and we watched a movie together after work called 12 O'Clock High. It's a army movie from, I think like 1950s, like World War II. He told me that's how they train people at PTC, where he spent his early career. And during the movie, he asked me, who is most important? When you're thinking about decision, who are you solving for? Rate these in order, the team, you, or the company? And I said, okay, yeah. I put team, then the company, then me. He's like, interesting. He's like, unanswered. but also very different than most because most sales leaders say me than the team and the company. The right answer is company, team, me. And it's just like, it's like I'm just reliving that moment here with OJ is Halligan showed me through that training that as a corporate executive, I have to have the company's mindset first. My job is not to show up to that meeting and be the senator for the sales team. It's to be a representative of our corporation and to have a joint mindset with the rest of the leadership team.
Speaker 2If you don't have that answer, you got to get that answer. If you get that answer, I think you're halfway there because that answer, that perspective will drive your decisions and your perspective on what kind of business model, what kind of structure, what kind of talent you need to execute to that data.
Speaker 1Okay, just keep going on it though because like, all right, I came in here, I've got 10 reps, we're series B. Maybe we have like 5 million in revenue. Maybe we have 400 customers. Isn't it pretty clear what I'm selling to who at this point?
Speaker 2Yes, it is probably pretty clear and you'll probably go from 5 to 10 to 15, no problem, rinse and repeat. But what's the point of getting to 15? By the time you get to 15, you realize for a number of reasons, it's not scaling and now you're decelerating and growth, you go from 15 to 20. All right, that kind of deceleration happens all the time. Why? All the time. You go, you raise your big series B and number one, your TAM might actually be smaller than you think. Second, your business model might get in your way. Maybe it's your pricing. Maybe it's how you figure out your packaging. Maybe you went to freemium and you gave up too much free and you got nothing left and you end up being like an Evernote. There are a number of reasons and maybe it's just execution. Like, your model is just not a model where you can just hire sales heads and expect. Like, if you're a product-led growth company, your growth is much more driven by your web traffic and demand generation than number of reps, right? So if your demand generation peters off, then you have to just have a bloated sales team.
Speaker 1Okay. So let's, I want to still unpack that as the 32-year-old that comes in and takes over this team first time in the seat. So let's talk a little bit about what you're telling me is like, there's other stuff that you didn't have to care about before. Like, you may have a TAM ceiling, a total addressable market ceiling. And that's, as a VP, I'm sitting there like, what? I don't even know what that stands for. I don't know what that means. Isn't my founder thinking about this? Isn't my CFO thinking about this? You're also saying you may have a demand gen issue. Yeah, fine. You can hire twice as many reps, but unless you have twice as much demand, it's not going to work. And I'm like, well, isn't that what my CMO's job is? Like, work that out.
Speaker 2This is a top-down company strategy. This really should come from the founder of the CEO. I think it's very likely that if you're a Series B company, you may not have, your company may not have this. And I think on top of hiring the team and restructuring to go from 5 to 10 million, part of your job is to make sure that the company has these perspectives on where it wants to go and is aligned so that your CMO actually does invest in the company and the right initiatives to create that demand. So that you can hire the right people to satisfy and convert that demand. So the product is actually building the right product at the right time. Because there's a lag time. You want to do demand generation? Well, it's going to take six months to build a new program. So you've got to get that right. And especially for PLG, because a lot of times the founders are very, very product-centric. And the product alone gets the company to 5 million. Right? That's a big accomplishment. Right? And the product founder might think of, well, if we just keep doing what we're doing, 5 goes to 15, 15 goes to 45, 45 goes to 90. That's not how things actually work. And so there is also a lot of times, I'd say, a partnership that needs to be developed for the business leaders. A lot of times it's a combination of the CMO and the CRO and the technical founder. That is part of your job. You're not just managing your team hitting the quota. It could be, but you're probably not going to last through multiple stages. If you want to last through multiple stages, your job is to really partner with the technical side of the business to build a company.
Speaker 1All right. So how do you coach people through that transition? Because I could see the new VP of sales being like, I'm trying to, but I feel like it's a territory war out there. Like every time I go to the marketer, they're just saying, hey, like we're just, we're generating tons of leads. Go do your job. And every time I go to the product person, it's just kind of like, listen, we have 5 million in revenue and 400 customers. Go find another five. Like the product is fine. I could just see them being that lone wolf and feeling like, oh my gosh, I don't have a partnership out there. A lot of times
Speaker 2it depends on the founder and the dynamics there. But the theme always is you got to read the room and take the influencing skills, you've developed as a sales professional. Number one, it starts with like making sure everybody has the right context. Number two, you got to align people and what's the problem you're trying to solve, right, in the next 12 months. The third piece is to align people on the options that you have.
Speaker 1Let me throw a couple situations with you where I'm sure you've, have come up for you and coaching when it gets harder. And that is, okay, we missed the quarter by like 25%. Yeah. And OJ, I'm going to the board meeting as the CRL, the head of sales. Like, what do I do? Because honestly, I'm trying to like think about your guidance of a corporate executive. But honestly, I feel like we have a great sales team and I feel like marketing has just fallen off the cliff. Or I feel like product has just become very unstable. So, do I say that?
Speaker 2If you are in that position, that tells me that I wouldn't say it's too late, but you're already behind the ball on actually making the rest of the exec team your primary team.
Speaker 1This is a key point. In my mind, the differentiation between an exceptionally run company and an average run company. And that is, are you figuring out if you're doing well at the board meeting? After the quarterly results are delivered, people have had a chance to read them and we're discussing them. Which is most companies. Are you determining if you're doing well based on leading indicators in your business that show up nine months before the board meeting happens? The leads that were created in a month. The product features that were delivered. The product MPS. The sales pipeline growth. Are you living by the quarterly results or are you living by the lead indicators? That's what OJ is pulling out here. Is, in the example I said, if people are pointing fingers at the board meeting, you're running like an average company. Not an exceptional one. And you need to understand the lead indicators and live by them. All right, let's go. Let's get back to OJ.
Speaker 2Sales leaders are in that position when the dynamic between them and the rest of the company is the rest of the company is going to do what they do. They're obviously going to try to support the revenue engine, but it's a bit of a vending machine kind of relationship. Sales, your job, get me the money. We're going to do what we're going to do. That is exactly the dynamic that gets you in trouble. And so, if you're already in that situation, I would say we can talk about tactics to get through this quarter, but your best thing for you to do is make sure that you're not in that position again in the future because in the alternate universe, what would have happened is you're super tight with your head of marketing and head of product. So, way ahead, way ahead, before the quarter even started, your head of marketing and your head of product and your founder, CEO, everyone already knows where the potential hotspots are. This concept of, hey, the demand generation is not there, that should show up way before the revenue performance shows up. And so, if you haven't been having those alignment conversations along the way, of course, at the end of the quarter, you are in trouble because everyone's blindsided. You've been so focused on delivering the number as opposed to educating and making sure the rest of the management team is actually on the same page. If they are on the same page, this is not going to be a surprise. Going into Q3, people already know, you would tell the team, you would tell your management team, look, I know we crushed Q2, but these are the XYZ reasons I'm worried about Q3 and therefore Q4. All right? And a conversation that you would have on the management team could be, okay, what should we do? We have two options. Should we optimize and like find ways to just boost Q3 and Q4? Or do we just find a way to scrap by and just know that it's going to be tough? We might miss Q3 by 20%, but let's really build the right thing so that at least next year, Q1, Q2, Q3, Q4 is going to be great. That's a management level decision which you're a part of, right? And you might have to come back to your sales directors and be like, listen, we made these decisions. Q3 and Q4 are going to be hard. Strap in. Now, in that scenario, if you actually end up missing the quarter, everyone's on the same page. You're not going to get fired because you are part of that decision and you've brought the rest of the Q3 as a company and alongside with you. -
Speaker 1Yeah, I love that. So let me throw you another one that I'm sure plenty of folks who end up in this seat find. I know you and I have grappled through this a bunch. So the next call is like, okay, OJ, it's December 15th. We're doing our annual planning and the board wants us to go from 25 to 50. And I know what we have here. I know my sales capacity, my hiring velocity. I know my demand gen formula. I know everything. And that adds up to 25 to 40. And they're just like, figure it out. So what should I do?
Speaker 2Yep. Been there. Been there. Look, first of all, I don't think there's anything wrong with that. Because if any leader comes in and says, like, I have such high degree of confidence that 12 months from now, I can't bridge that $10 million gap. It's like, hey, things happen. Bluebird deals happen. There's a lot of things that happen. So I think, number one, I think you should be comfortable taking on. A target that exceeds the operating plan, which you know of today and have faith in you, your team, and the rest of the executive team that you're going to bridge that gap. So what does that mean? Well, number one is your job to make sure that everyone understands why 40 is the reasonable bottoms up target. So then everybody is on the same page. Everybody, meaning CEO, product, marketing. Everyone knows that that $10 million gap is not your problem to solve. It's a company problem to solve.
Speaker 1I think OJ nailed this. You have to have the confidence to educate the board. Like, a lot of board members don't come from sales. You have to have the confidence to educate them on how this works. And hopefully you do it in a quarter where you hit your number. Because that's when you have credibility. And it's really simple. It's just like. It's just like, yes, here's how our math works. We get opportunities through three sources. Marketing generates opportunities. Sales generates our own opportunities. And we have a cold calling team of SDRs that generates opportunities. Here's how the close rates of those opportunities have closed historically. And here's the sales cycles. When you do that math, it spits out this number, which was us winning by 5%. Oh, that's brilliant. I've never heard that before. Yeah, great. And then, great. Three quarters later, when you miss, and you're like, what happened? Like, the math. Like, here's the marketing generating opportunities. Here's the sales generating opportunities. Here's the SDR generating opportunities. Here's the percent closures. Here's the sales cycles. So what changed? Well, we have to understand. Maybe sales cycles got longer. Why? Maybe close rates went down. Why? Maybe marketing generating leads went down. Why? But at least we're having a conversation at a much deeper level than just like, you missed the number, you're going to get fired. We have to educate the board on this. That's the math, ideally, in a quarter when we hit.
Speaker 2All right. You can find a way. You'll solve that 40, which is a lot. 25 to 40 these days is no joke, right? That extra 10 is everyone's problem. So we got to figure it out. And so you kind of go in eyes wide open, be like, like this, like you say, I'm willing to put my comp, my quota on the line. I'll take 50, but I want everyone to know that every time I know a gap and do, can I have everyone's joint commitment? That we're going to figure this out as we go.
Speaker 1So OJ, I know lately you've been doing a lot of reflecting on PLG, specifically PLG at massive scale, which is important because the strategic implications of that occur very early. All right. And so I know you've seen some PLG companies stall at like a $5 billion market cap and get kind of stuck there while others just accelerated through. So can you tell us about your reflections and research there?
Speaker 2Yes. I find it really interesting because I think. I feel like we're like 10 years into the PLG, 10 to 12 years into the PLG phenomena, right? Yeah. A couple of companies like Dropbox and Evernote way early on kind of figure out this bottoms up thing and, and they've done well. But interestingly, we're like 12 years in, maybe more, maybe let's call it 12 to 15 years in. There are very, very few PLG companies that cracked 10 billion in market cap. Very, very few. Most are below five. So there's only a few. There's only a few that really, really broke out, right? Uh, Atlassian's one. I, I like Datadog. HubSpot's a great example. These are companies that really broke through and now they're 10, 20, 30. I don't, I mean, where's HubSpot at? I don't, I don't know, but it's, it's massive. We're on 20 right now. Yeah. One of my best stocks. It's great. But that's a big discrepancy given how many, um, how many companies, PLG companies have been built. And, and from my experience, something really. Really interesting happens as PLG companies go through that hyper mode. A lot of PLG companies get confused on what it takes to be an enterprise company. And the confusion comes in step one, founder management team realized, well, we got so many users, we got so many businesses. Wow. There's so many, there's a couple big enterprises that want to pay us a lot of money. And all we need to do is, and we all, but there's a lot we need to do, but it's really around the security permissions, right? Um, data residency, all that stuff. It's going to be a multi-year process, but it's worthwhile to take because gosh, we already have these enterprises that, that are validating, right? That if we, as long as we build this security stuff, they're going to come. So what happens in the next couple of years is they spend so much time building permissions and audit logs, stuff like that. Super interesting. And guess what you convert, you convert those enterprises that are already using a lot of your free product and they're like, yeah, great. And so you, now you have a couple of 500K deals, right? Maybe even over a million dollars and that's awesome. And then they get into the, something I call the PLG trap. One day they wake up and they realize, whoa, I got all this security stuff and I've converted all these enterprises onto my security at my enterprise product, which is charges a lot more. But why is my pipeline suddenly dry? And what happened, what you realize is like, oh, you can build all these security features, right? But you're actually only appealing to the few enterprises that already have a lot of organic usage of your product. What about all those other companies that haven't even gotten, that your product hasn't gone viral internally yet? Your security features don't appeal to them because you're irrelevant in that organization. And this is what happens a lot. And I see, I think a lot of companies. You can, you can leverage the security play for a very long time to get to a couple of hundred million and you go public and then suddenly you do really decelerate because you focus so much on the security. Now your top of funnel is probably not growing as much because you're not focused as much on, um, sort of driving new users, new use cases to come in. And, uh, yeah, so that's why I think a lot of people don't know. So that's why I think a lot of people would get stuck. I call it the, in this PLG trap.
Speaker 1Kind of blowing my mind to be honest with you. I'll, I'll be frank. Like OJ sent me a 15 page paper. They wrote about this before this interview. And I thought it was brilliant. I didn't see this before. I knew that that was the typical playbook was the best PLG companies, PLG 1.0 was get that Dow/Mao ratio great and get those free users cooking and get the auto monetization humming and get to 5 million and then build the security features and you get to IPO. But what about after that? What about like is IPO success or is like historic company, $20, $50 billion valuation success. That's how OJ is thinking here. 5 billion stock market cap is like not. not good enough for him. It's surfaced in this new strategic consideration, which is like, yeah, fine. Like you can win a deal when you have users at a company, but at some point that runs out. And so how do you win if there's no users? That hasn't been in the PLG playbook. And I think OJ is saying it should, and I agree. Let's get back to him.
Speaker 2And if I were to look back, hey, how can companies get out of that? I think from a very early stage, a company needs to realize, all right, yes, I'm going to go build this enterprise security roadmap that's going to help convert my existing large opportunities. But I also really need to think about two years from now, what is the enterprise level value that I want to be able to sell to a company? Does that require you to build a new product, right? And take advantage of your brand and your current distribution? I think, Figma, building FigJam is interesting. Because FigJam potentially could be their way to be more relevant on an enterprise level scale, right? Asana had an opportunity to go after OKRs in their gateway. OKRs is not project management. They're tied, but that could be an enterprise level kind of scale, right? Dropbox didn't really have one, right? We never made that jump. And so it was always pretty much storage. And maybe some like, there's a large file transfer use case, but there's not like a really enterprise level use case. You need to have a perspective on what's going on. what your ultimate enterprise value is that you're going to deliver and then build towards it. And I'll bring it back to work on leadership. So this conversation, I actually think is really relevant for revenue leaders. Because I think a lot of revenue leaders, they're so focused on just hitting targets. The only thing they really advocate for is whatever their customers want, their existing customers don't want, which is security stuff. And they're not actually helping and partnering with the founders and marketing and product to actually think about, all right, let's say we built all this enterprise stuff, all the security stuff. Still, how are you going to get a C-level executive in an outbound way to care about your product two years from now? Do you have that product? If you don't have that product, what's the adjacent product that you can either pivot or build, add, acquire to get that? That responsibility, I think, partially rests on the shoulders of revenue leaders to not just advocate for the near-term feature requests, but to also advocate and help align and drive alignment on what that longer-term enterprise value vision is.
Speaker 1I love how you tied the leadership growth that we talked about in the first half to this PLG trap as a perfect example. And I think this PLG trap is, I've never heard of this before. I think we couldn't have seen it because it's just happening now. The first generation of these PLG companies 15 years ago are at this maturity stage. And I think it's a great example of that. I think it's a great example of that. Yeah, they are hitting that ceiling. So it's just happening now. OJ, thank you for doing what you do. I've always thought about the arc of a entire professional life as learn, do, teach. And I feel like you are an amazing representation of that in going through the various stages of your career now in the teach mode. And I appreciate you sharing. I appreciate you going out and teaching and making space to mentor the next generation of these leaders, as opposed to just rack up the next unicorn like you could. And I appreciate you taking the time to study what's continuing to go on out there. Because even this one example, the PLG trap, I think that is happening now. We couldn't have seen it five years ago. And especially with what's coming with AI and this being a potential distribution channel, we're seeing this with the big unicorns, but it has implications where you're going from 10 to 30 million in the decisions you make. So I appreciate your drop in knowledge with us today.
Speaker 2Thank you. It was a great time. And this learn, do, teach, I learned from you. So thanks for having me.
Speaker 1Today's episode was written and produced by Matthew Brown. Our show is edited by Pizza Shark Productions. Big thanks to HubSpot for Startups and to the HubSpot Podcast Network for keeping the audio on. Hey, also, we're a new show. So if you like what you hear, or if you hate what you hear, leave us a rating and review over on your favorite podcast player. I love the feedback. Also, check out Stage 2 Capital. We're the first VC firm running back by over 500 CROs, CMOs, CCOs. So if you're an entrepreneur looking to scale your business, check out stage2.capital. All right, that's it for today. I'm Mark Roberge. See you next week. Thank you.
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