Lessons from the SaaS Trenches: Adapting to a Changing Market with Roee Hartuv

Randy Wootton (00:04):

Well, hello everybody. This is Randy Wootton, CEO of Maxio, and your host of SaaS Expert Voices, where we bring the experts to you to talk about what’s going on in SaaS today, and what are some of the trends that are unfolding tomorrow as you build your company, or oversee your company, or invest in SaaS?

(00:20):

Super delighted to have Roee Hartuv, who’s actually coming to us from Germany today. He has an incredible background and experience. He’s been working as a startup executive for the last 18 years in high-growth SaaS companies, so lots of expertise to bring to bear. He’s built and managed sales, CS, and marketing teams. And in our pre-brief, we shared a lot because that’s my background as well. But what he has that I don’t have is he’s currently a revenue architect at Winning by Design, which is one of those great sales methodology companies, really the coolest kids have it. We signed up for it. But along the lines of Challenger, along the lines of Target Account Selling, and all the other models, Sandler, that you could. It’s an incredible program and I can’t wait to hear Roee’s lessons learned and some of the best practices that he’s going to share with us. Welcome, Roee.

Roee Hartuv (01:09):

Great to be here. Thank you for having me.

Randy Wootton (01:12):

We have all of these exciting things to talk about, but in our pre-brief, we had this really interesting conversation around, are we in a SaaS recession? What is that broader context that we’re operating in? I’m arguing for my board right now that it’s been super hard and there’s been a contraction in investment, and investment means that CFOs aren’t spending money. “Just talk to my sales team. They’re like, ‘It’s harder and harder than it was two years ago.'” And you had a really, really interesting perspective in terms of the IPO market and what’s been happening. Could you just share a little bit about your broader perspective, what’s happening in the market, and how this plays out for private companies and thinking about PE versus VC?

Roee Hartuv (01:51):

Yeah. Everybody feels distressed in the recession, right? Growth has declined drastically for most of the companies out there. We’re all feeling that, we had layoff rounds, we’ve all been there. But I want to add another perspective, and another indication that we are actually in a recession. The fact that there are no IPOs.

Randy Wootton (02:18):

It’s mind-boggling. Do you want to recite the facts? I got them written down here, but it is mind-boggling, what’s been happening.

Roee Hartuv (02:23):

Yeah. What are the recent IPO SaaS companies that went IPO? We had OneStream, what, six weeks ago? Before that, Reddit? That’s it. I’m probably missing a few that went under the radar, but that’s basically it.

Randy Wootton (02:42):

Yeah. I mean, to put it in perspective, and you had shared this in our pre-brief, in 2021 there were 98 software IPOs, in 2022 there was one, in 2023, three. And to your point, this year so far, there’s only been three-ish. Just mind-boggling.

(03:01):

Then I think the other thing you were talking about, what I thought was really interesting, was the number of private unicorns.

Roee Hartuv (03:06):

Yes, that’s another… But before we get to that-

Randy Wootton (03:10):

Yeah, sure, please.

Roee Hartuv (03:11):

… Why am I looking at IPOs? Because IPOs… We’re experiencing a bottleneck. Because our entire industry was like a company was founded, they grew, got investment from VCs, at some point, there was an exit event, usually, it’s IPO or acquisition, and basically, those companies became public companies, and the money went back to the VCs, who went back in investing. We had that cycle. No IPOs means that we’re stuck, there’s no movement here.

(03:50):

Which brings me to the next point. Back in 2021, according to Dealroom, there were 1,200 unicorn private SaaS companies. Just as a perspective, public SaaS unicorns, there were 364. And that includes Salesforce, Meta, and all these fantastic companies that were already public, right? Software companies, SaaS companies, 364, while in the private market, there were 1,200.

Randy Wootton (04:29):

And your point, just for people who may not know, a unicorn is a billion-dollar valuation.

Roee Hartuv (04:35):

Yeah.

Randy Wootton (04:35):

And the distinction you’re making is that public companies, who have all their financials out in the open, everybody’s reviewing them, only 364 of them were actually valued at greater than a billion dollars. Whereas private companies where their financials aren’t public, but you have a bunch of exuberance with investors who think these are going to be the next billion-dollar companies on the market or more, there were almost four times as many billion-dollar plus value companies and they haven’t gone public.

Roee Hartuv (05:04):

Exactly.

Randy Wootton (05:05):

So what’s happening?

Roee Hartuv (05:07):

All these companies were preparing to go public. They’re still preparing.

Randy Wootton (05:12):

Yeah, I remember.

Roee Hartuv (05:14):

[inaudible 00:05:15].

Randy Wootton (05:14):

And to your point-

Roee Hartuv (05:15):

… cease to exist, right? But most of them are [inaudible 00:05:18].

Randy Wootton (05:18):

Well, some of them have ceased to exist, and some of them have had to take down rounds. I think the other issue is a lot of people don’t want to take the down rounds, right? Because then all the VCs have to write down their valuation. I remember when I was coming up through when I was at Rocket Fuel, we were a public company, we were 400 something million gross, 240 million net. At that time, this was 2015, 2017, the rule of thumb was if you could get to $100 million dollars, you were tracking for an IPO. Today, I think what we’re seeing is it’s at least 300 million. I mean, OneStream, that just came out, they’re the belle of the ball, they had all the great metrics, incredible net retention, incredible gross retention, but they were $500 million. So you think about-

Roee Hartuv (05:59):

That’s why we need to move more.

Randy Wootton (06:02):

Sorry?

Roee Hartuv (06:03):

We’re working with a few pre-IPO companies, right?

Randy Wootton (06:08):

Yeah.

Roee Hartuv (06:08):

And we’re like, “100 million? No way.” Even 300. I’m currently supporting a 300 million ARR company. They have planned to do an IPO back in 2022. Of course, that got postponed. They still plan next year, but of course, that will continue to be postponed. They still haven’t reached that 500 million. Now, I don’t know what’s going on with discussions with the investment bankers, and that they are telling them, “Hey, this is the right timing for you.” And at the end of the day, there are, let’s say a few private investors, and they’re working with all those, let’s say 1000, 1,200 unicorns. Eventually, the market can absorb only, and that’s in the good days, 50 IPOs per year. What’s going to happen with the rest? Who knows?

Randy Wootton (07:05):

Well, I think that’s what we were talking about is some will go to PE, right? You’re seeing an enormous amount of acquisition, and the PE firms have a lot of capital on the side. The capital commit, is not actually in the bank. But people have said, “Yeah, we want you to go buy.” And some will be bought by strategics, but I think the mix has really changed.

(07:22):

But what does this mean? We were talking about a recession. Why does that create a knock-on effect in terms of the recession? Is it, to your point, that the VCs aren’t getting the liquidity from the transactions to be able to go back and invest in early-stage companies? Is that the primary reason or is there something else?

Roee Hartuv (07:38):

That’s exactly the reason. And what that creates is there are no additional funding rounds. But there are fantastic companies with great products that have 100, 300 in ARR. They’ve already proven that they are a successful company, but still, most of them are not profitable, and they’re losing money, and they need additional funding in order to continue to maintain operations. That’s the problem.

Randy Wootton (08:10):

In our Maxio growth report, one of the things we allude to is the dynamic of the VC funding that has continued to go down. Up until this quarter, it’s increased in total dollars in terms of quarter-over-quarter investment, but the number of deals is still low and decreasing. That to me shows that what you’re finding is VCs are still doing deals, but they’re only doing really good deals.

Roee Hartuv (08:37):

Or deals that have AI in the title.

Randy Wootton (08:40):

Right. Everybody in AI, that’s true.

Roee Hartuv (08:42):

That’s right.

Randy Wootton (08:43):

So Roee, here we are, we’re in a recession, everyone’s freaked out. I know friends when they were trying to raise money, it used to be: raise money every 18 months. You raise for six months, you execute for 12 months, you raise. And you’re trying to hit what used to be Vogue, the triple, triple, double, double, double, the T2, D3 growth rate.

(09:02):

Let me ask you before I ask… I want to get into, so what should you do? One of the things you have is this really interesting viewpoint because you’re working with a bunch of companies. What are you seeing in terms of growth rate? Obviously, without sharing private information. Did it used to be three years ago, four years ago, the assumption was 20% growth and those were the companies you’re working with, today it’s 15% growth? What are you seeing in terms of the reality of growth rates broadly across your portfolio? Obviously, you guys help people get better, but when you start with them, what’s happening?

Roee Hartuv (09:33):

Back then, in the good old days, as we called it in 2020, we worked with companies that triple, triple, double, double, double. So they doubled their growth, and they doubled their ARR year over year. That was the type of company that we worked with. Nowadays, 30% is projected to next year. Some still have very high targets from the investors, and that’s an indication, right? The market was in a shock for two years. We let people go, we extended runways. But now the investors are coming back and saying, “Hey, 2025, you guys need to find a way to continue to grow.”

Randy Wootton (10:19):

And drive efficiency through AI, right?

Roee Hartuv (10:25):

Drive efficiency. Let’s start with AI, but driving efficiency would mean we’re not only going to measure you guys on the growth rate, but we’re also going to measure the costs. And that’s the big difference.

Randy Wootton (10:37):

Yeah. Especially for VCs, right? It used to be what we call the growth at all costs. Put a bunch of money in there, it’s a land grab, grab market share, invest like crazy, and go-to-market. Everyone’s buying, every startup is buying each other’s startup technology. That shift to that efficient growth model and everyone’s been talking about it, like the rule of 40, where you got to be able to show that you’re on a path to profitability. If you’re still growing fast, you could be a little negative EBITDA, but if your growth is slowed down to 20% or less, you actually need to be profitable to show that you’re not going to burn because the profile won’t get invested in. I think that’s where we’re seeing this real dynamic.

(11:15):

So in the Maxio growth report, which we’ll include in the show notes, what we’ve seen across our 1,500 customers that are in the report, we have 2,000 total, is that the average growth rate was about 17% year over year. And these are all private companies, so these are all the companies that you’re talking about. We work with pre-seed to a couple hundred companies greater than 100 million.

(11:38):

I guess one of the questions I wanted to follow up on, you work with companies where there’s still this artificial, unrealistic expectation, because it’s always easy to build a plan, right? Here, let me show you the assumptions. Now we’re in the back half, we’ve just wrapped up Q3 for most companies in their calendar year, fiscal year, how many people are actually hitting the targets that they set out in January? The companies that you’re working with. Is it most are still okay, or many are like, “Oh God, we aren’t hitting our growth numbers, so now we’ve got to go into plan B.”?

Roee Hartuv (12:06):

Many are in that, “Oh God.”

Randy Wootton (12:07):

Yeah.

Roee Hartuv (12:12):

I think everybody’s updating their forecast for the entire year. We only just still have one quarter to go, but everybody is updating that.

Randy Wootton (12:21):

They’re all re-planning. They’re all trying to do the stub budget for the final quarter, so they can hit their bonus targets or negotiate.

Roee Hartuv (12:29):

No. Even they’re looking at 2025 because everybody’s now planning on 2025.

Randy Wootton (12:36):

Yeah, right.

Roee Hartuv (12:37):

One company, for example, last year they had that board discussion on 2025, and it was all about, “Hey look, we’re not going to hit our targets in 2025 and 2024, and you guys want us 80% year-over-year growth. You guys invested in us two and a half years ago, the market was different. What we predicted that we’re going to do in 2024 and 2025 is no longer applicable.” That’s the conversation. It’s not an easy conversation, but-

Randy Wootton (13:07):

No. I’ve been on both sides of it and it’s really hard. So what are you finding, as we were talking about in our pre-brief, in a recession, what are the classic plays? What are the two things that people initially focus on?

Roee Hartuv (13:21):

Yeah. Extending that runway, coming back. There are no fundings. You need to extend the runway. This is the first thing that everybody did, cut costs, which basically means letting go of people. Let’s look at our bottom 20% or bottom 40% and cut them off.

Randy Wootton (13:39):

Yeah, I think that was the thing-

Roee Hartuv (13:41):

[inaudible 00:13:41], from our experience, it did not influence the top line as predicted. Meaning it was a healthy cut, it was a healthy reduction.

Randy Wootton (13:57):

Oh, I see what you’re saying. Getting rid of the people. Well, I think what happened was we were in that weird scenario where you couldn’t hire anybody and you’re growing like crazy. So people were staffing, your number one constraint was capacity. You have this many more customers, you need this many more implementation folks. But to your point, when they did the cut, and I think you saw that broadly across the space, the big guys got in late, but millions of jobs lost. It was kind of like pulling the gum out of the machine. It was like, “No, no, no.” To your point, it was a healthy cut. They were able to maintain top line, maybe not at the same rate, but they were able to continue to grow. So great, everyone cut heads.

(14:32):

Now we’re back into a situation where it’s kind of a buyer market versus an employer market, but we’re still struggling to get to profitability. So what’s the next thing that everyone’s going to be focusing on?

Roee Hartuv (14:43):

First of all, everybody’s struggling to find how we move the mindset from growing at all costs, hiring people just to fill in the ranks, and let’s focus on things like productivity per rep, and how much revenue each seller brings in. How do we do that? Again, in the good old days, when we wanted to double our revenue, we just doubled the amount of sellers that we had. But we no longer have the ability to do that because we cannot pay the salaries. So we need to double our revenue, we can, but let’s say, sake of the example, we want to double our revenue, we need to find an effective way to do that. That transition is a totally different company, how a company operates, and the culture of the company. That’s where we spend a lot of our time with our customers.

Randy Wootton (15:41):

Well, let’s do that. Let’s shift to the lessons learned from your customers. I think the segue here was your broader point, which is, that once they cut the heads, then they start focusing on efficiency. And that efficiency is through automation, it’s through different ways of doing metrics, and automate, operate, eliminate. Are there processes you can totally eliminate? Are there things you can outsource to partners, etc? But you have a list of great lessons learned from your customers that you’re working with right now.

(16:10):

First let’s start with just what doesn’t work, in terms of your customers. What are the things you’re seeing, what people saying, “Oh, we’re going to go do this”, you’re like, “Oh, I don’t think that’s a good idea. I’ve seen 15 people do that.”? And then we’ll go into what works.

Roee Hartuv (16:26):

All right, the classical thing is focusing on acquisition only. Growth from acquisition, at some point, has a ceiling. There’s some sort of ceiling above that a company cannot continue to grow through acquisition.

Randy Wootton (16:47):

And new logo acquisition is what you’re talking about, not acquiring new companies?

Roee Hartuv (16:51):

Yeah.

Randy Wootton (16:51):

You’re talking about that [inaudible 00:16:52]-

Roee Hartuv (16:52):

Acquisition of new customers, yeah.

Randy Wootton (16:54):

Versus going into your customer base, which we’ll talk about in expansion. So new logo acquisition, you’re suggesting there’s some sort of asymptote. When you start to get to the efficient frontier, you just can’t add another body. You either need to open up a new segment, or a new region, or something. Is that what you’re pointing to?

Roee Hartuv (17:13):

Yeah, let’s say that. But you’re selling to a segment, there’s a limit to how much you can sell in a given year, right? At some point it plateaus. I don’t know, you’re generating 20, 50 million in new ARR, at some point, that’s the level, right? There’s a stage that a company now needs to focus on, you said expansion, but it’s not only expansion, it’s also retention.

Randy Wootton (17:40):

Yeah.

Roee Hartuv (17:41):

So let’s talk about retention first. When you think of a recurring revenue business, most of the revenue comes from existing customers who keep on renewing with us. This is an exercise everybody should be doing, and know the numbers. 80%, on average, of a company, let’s say mid-stage scale-up company, 80% of the revenue comes from retention usually.

Randy Wootton (18:16):

Well, that’s the beauty of the SaaS model. I remember being at Salesforce, and joining them in, gosh, this was maybe 2012, so it wasn’t huge. I remember Benioff standing up and basically talking about just that. I joined the customer success team under a woman named Maria Martinez. The emphasis around the retention, they knew what their full fiscal year was going to be, plus or minus a couple percentages at the beginning of the year, because they had the retention so dialed in, they knew that was true.

(18:45):

So the new logo acquisition, to your point, was important, but it didn’t affect their earnings. I think that’s why you’ve seen the SaaS business model, and SaaS companies, it’s all about future profits, predictability, and being able to deliver on that. Even if a lot of the companies used to be unprofitable, they’ve been able to show they can go profitable and then drive growth. So to your point, understanding gross retention, again, across your client base, what are some good metrics in terms of gross retention? Is it at least above 90%? You’re in trouble if you’re 70%. What’s the point at where you’re like, “This company really is struggling on gross retention.”?

Roee Hartuv (19:22):

It depends, right? It depends on your ACV, it depends on the segment that you’re selling to. Let’s say you’re an enterprise, you’re selling to enterprise Fortune 1000 companies, your retention, and usually, it’s a very big contract, large ACVs, multiple year contract, your retention rate should be close to a hundred.

Randy Wootton (19:43):

Right.

Roee Hartuv (19:43):

[inaudible 00:19:44].

Randy Wootton (19:44):

And it’s very hard to get out, right?

Roee Hartuv (19:47):

Of course.

Randy Wootton (19:47):

You go through this long sales cycle, 12 to 18 months, getting up and going. You’ve gone through a buying process, procurement, implementation process, the rollout. Once you’re in, you’re like, “Woo-hoo”, but it takes forever to get those guys. So yeah, close to a hundred percent. Go to the other end of the spectrum. Now we’re talking about low ACV, $5,000 deals, you can get up and running in a week. Not PLG, but that first stage where you need sales motion. What do you find is the gross retention at that end of the spectrum?

Roee Hartuv (20:14):

Above 90, it should be, right?

Randy Wootton (20:16):

Yeah.

Roee Hartuv (20:16):

At some point when you go too low, you’re not really a recurring revenue company. You are reoccurring to a certain extent, right?

Randy Wootton (20:24):

Yeah. The monthly, when there’s just purely monthly, you don’t know if they’re going to continue, I think there’s a lot of PLG companies start that way. They go out with a usage-based model, and monthly pricing, and they’re trying to convince people, “No, no, it’s ARR.” But really? Is it really ARR? But yeah, I think for us, anything below 90%, if we’re looking at deals, you scratch and want to go after it and see what’s really happening there.

Roee Hartuv (20:48):

And coming back to where we started off, companies need to start looking at increasing that. Every percentage point from retention comes at a fraction of the cost of acquiring new customers. We’re looking at efficiency, we’re looking at costs, let’s focus on that. Everybody knows that the recurring revenue business model is based on recurring, existing, or customers renewing with us, but what they actually follow and implement, and where they spend their resources on, usually it’s back to acquisition.

Randy Wootton (21:22):

Yeah. Let’s go there a little bit. Let’s talk a little bit, one of the things you mentioned earlier was what doesn’t work is when companies conflate product-market fit with go-to-market fit. Again, I think this is one of the things you and your company do really well is drive this distinction to the ground with your company. So tell us a little bit about when someone has product market fit and what’s the distinction or the evolution of go-to-market fit.

Roee Hartuv (21:49):

Let’s start off with product market fit, that usually happens first. This is where customers are willing to pay for your products. Now, you can ask three different people, “What’s product market fit?” You’ll find you’ll get five different answers. I like to say, you ask a VC, a series A investor, “What’s product market fit?” The usual answer is that you’ll get $1 million in revenue, or recurring revenue, and let’s say 2020 customers. You ask a founder, “How did you know when you reached product market fit?” And they would say, “Hey, it’s like surfing and riding waves. At the beginning, it’s very shaky, but once you catch that wave, you know that you caught the wave, right? It’s smooth sailing from there on.” We like to say, it’s not easy always, but when customers come back to buy the same thing.

Randy Wootton (22:46):

When they renew, when you have a series renewal.

Roee Hartuv (22:49):

When they renew, yeah. Sometimes, when you have long contracts, you don’t really know that, but you have leading indicators that allow you to understand, “Okay, the usage is high. I know that they’re going to renew.” That’s product market fit. That happens roughly, again, and I will take what the series A investors say, around 1 million give or take. Could be earlier, could be later.

(23:13):

But then you have go-to-market fit, and that’s where you start to have a repeatable process going to market. A repeatable process, and usually it’s around the sales process, is that you start to see common numbers across that sales process. This means the sales velocity, the time to close, it’s not all over the place. It’s not I’m closing one client after two calls, 10 days, and another client after six months. One ACV is 20K and the other one is 120K.

(23:56):

We all know that in the earlier stage, you are all over the place, your numbers are all over the place. But at some point they start to appear around a certain average. So all of the sales processes start to look the same. You’re selling to the same segment, it takes the same amount of meetings, and the sales process looks the same. That’s where you know have found your go-to market fit. And when you have achieved that, this is the time to press on the gas and move to that scale-up mode.

Randy Wootton (24:36):

Awesome. We’ll talk about that in just a second, but I think you’re absolutely spot on in that this idea of when you understand your ICP, you’ve been able to articulate that, you understand the persona that you’re going after, and you understand the competitive context in which you’re operating. So there’s a certain value that this prospect is going to ascribe to your solution, they’re going to compare it to alternatives, from spreadsheets to buying a Porsche, or whatever, and you’re going to figure out what the price point is. So to your point is, once you start to get enough at that, so they start to look the same, that’s when you can also start, to your point, add on the gas, i.e. adding more reps.

(25:16):

So this is where it’s so important when you’re moving from that product-market fit to go-to-market fit, when sales are moving from founder-led sales to having a CRO or a VP of sales who can come in and help scope all that, and has enough understanding of a process like Winning By Design, or something along those lines, they know how to run a pipeline, they know how to run a funnel, they know how to run a process, so that then they can start doing the qualification of prospects, and you start to get conversion analysis, win rate analysis, you start to build this radar around go to market.

(25:48):

If you don’t have that, then you start throwing reps at the problem, investing more dollars in reps and then marketing to feed the reps, you’re back in that mindset of growth at all costs. You’ve just spent money, and you’re throwing it at the wall, and you’re just hoping to bring stuff in. So I think the transition between product-market-fit and go-to-market fit is so essential.

Roee Hartuv (26:09):

Yeah, I want to give an example. Last year I was working, or supporting a company, they were at 10 million ARR. Around that number, I don’t remember the exact number. At that number, it’s quite impressive, right?

Randy Wootton (26:29):

Yeah.

Roee Hartuv (26:31):

Go to your series B, and series C, raise the next round, scale.

(26:37):

But when we looked under the hood, when we started to actually work with them, we understood that they have three, we call them go-to-market motions. So they were selling to enterprise accounts, and that was around 3 million. They were selling to SMBs, high-velocity sales process. By the way, same team.

Randy Wootton (27:00):

Wow.

Roee Hartuv (27:01):

And that was around five, five and a half million. An additional 3 million came from a self-serve PLG motion. They were all over the place. When we looked at that, none of these three motions were actually mature. Each motion by itself did not have a go-to-market fit. It wasn’t a repeatable process there. It was the same seller sometimes selling into this segment using, I don’t know, reference or the investors came in, some strategic kind of companies. Then they sold to SMBs, doing outbound processes with numbers all over the place. And PLG worked somehow to the totally different persona type individuals. That’s an indication that the company’s coming back to what you said, all over the place, nothing… They weren’t ready to scale. And when they came to us like, “Okay, we want to do everything at once”, and we’re like, “No, no, no. Stop. Let’s just focus.” We focused on the SMB market and we actually created a process and told them to focus only on that.

Randy Wootton (28:18):

I think that is one of the greatest pieces of advice for early stage companies is understand your ICP, run one go-to market motion for one product. Nail it. There’s always this inflection point. People talk, VCs are like, “Hey, when are you going to go multi-product?” Right? But you got to get the first product right. And that is that the value is clear, the pricing and packaging, the monetization is appropriate, and then you’ve got enough customers that are continuing on that you start to feed that SaaS flywheel that we were talking about before.

Roee Hartuv (28:48):

Exactly.

Randy Wootton (28:49):

I mean, you’re poking at this, or approaching this conversation we had before, about the difference between the startup versus scale-up mentality. The people that you… That was representative of startup mentality. Broadly, they’re coming in talking to you, what are those people thinking about? How are they framing their challenges when they’re in startup mode? And then we’ll shift to, what are the changes they need to make to be in scale-up mode?

Roee Hartuv (29:16):

In startup mode, it’s like testing. There are a few companies out there that have nailed this, that they have a very defined use case problem and product that solves that use case. They know right from the start, that this is what we’re solving, and yeah, they’re ready to scale. A company like that is HubSpot, I always like to look at HubSpot. HubSpot started off with a marketing automation platform, and they were focused on that until they hit a hundred million in ARR, before they launched their CRM platform, which was the [inaudible 00:29:52].

Randy Wootton (29:51):

Perfect example. Perfect example, yeah.

Roee Hartuv (29:54):

They were spot on. They were nailed on that use case and they did that. But unfortunately, that’s not how most companies find that growth path. Usually, companies try out different things. They sell to the enterprise, they sell… PLG is a bit extreme when you’re doing both of them at the same time. But let’s say enterprise and SMB, and doing different motions, and trying out until something sticks.

Randy Wootton (30:21):

That big distinction you’re making is what we were talking about a little earlier before between product market fit and go-to-market. If you have a scale up mentality, you’re focusing on that go-to-market fit, and that leads you to do some other things. For example, what are the types of people that you find are being hired at startups? What’s the mentality for how you hire and what they do, versus those that you start to bring in when you hit scale-up?

Roee Hartuv (30:42):

Startups are, we know that, superstars. Jack of all trades, right? These are the people that, whatever you throw at them, they will be able to figure it out. Today we’re selling to this industry vertical, tomorrow we’ll to another industry vertical. And guess what? We’re adding a sales engineer to help you do the sales. They will figure it out.

Randy Wootton (31:04):

And they love that. They actually like the chaos.

Roee Hartuv (31:05):

They love the chaos.

Randy Wootton (31:09):

If it stayed too consistent, they would get bored and want to leave and go to the next startup. But they like the chaos. In that model, the process is anathema. I think the point you made in our pre-meeting was that its success is based on people versus process. Can you say a little bit more about that? I mean, when you come in and see these guys, like the company, not the one you just referred to, but maybe another one, how it showed up that you got a bunch of rock stars, and they’re like, “No, no, no, you’re slowing me down if you introduce any process. I know what needs to be done here. I’m like a frothing revenue dog. I’m going to find the next deal.” How does that epitomize in some of the customers you work with?

Roee Hartuv (31:46):

Yeah, one of the things that we do is help create a process. Usually, for this example, the sales process. And, “Hey guys. Welcome. You’re now a scale-up company.” And in scale-up, you need to have processes in place.

Randy Wootton (32:05):

But they don’t want that, so how does that happen? Do you have the CEO call you in? Is it the board that brings you in? I mean, they’re not going to volunteer and say, “Yeah, what I want is more process in my life.”

Roee Hartuv (32:15):

Usually, it’s the CRO. The last company I worked with, or I’m still working with, the VP of Sales understood that. He has done this with another company and he told me, “I know that what we’re doing together will cause some of my reps to leave.” And that’s perfectly healthy. The culture of the company is going to change from everybody doing their own thing, opening partnerships, and figuring it out, how to bring in the revenue, now we need to start standardizing, and creating a unified process across the different team members.

Randy Wootton (32:57):

And ultimately to drive efficiency through consistency. That you have people, you can bring on people, you can train them, you can onboard them, you get them up to scale. So rapid time to onboard, reduce time to first sale. Then the way I think about it is, if you get the processes in place, you can help convince your AEs that they’re going to be able to pay their mortgage, they’re going to hit their quotas. So the process goes all the way through go to market, and then you guys have this great bow tie architecture where you talk about post-sales.

(33:27):

But I do think there’s this, at some point, you’re going to move away from being the 22-year-old, “Woo-hoo. I love closing anything”, to, “Oh my God. I have a family. I need to be able to trust the process.” I think sales in many ways, I worked with a guy who was an incredible sales leader, he would talk about, it is the process. It’s the activities that you do. Are you getting coached on a regular basis? Are you doing the film reviews? Are you being held accountable for your Monday morning, for costs, and your Friday afternoon checkout? And that mentality of the professional salesperson who’s able, they need, in many ways, that container to feel like they’re being set up for success.

Roee Hartuv (34:02):

Yeah. Which reminds me of a conversation I just had today. With a company that we’re working with, one of the things that we always focus on is the frontline managers. So we focus on that change management, and introduce new processes. Our ambassadors of change are the frontline managers, because without them, nothing will stick, so we need to get their buy-in. One of the things, the session that I had today, was to introduce, we call it an operational rhythm, or a cadence.

(34:34):

We know how it is, right? You have the top performing reps and they are promoted to become frontline managers. If they were not managed or coached properly, then they’ll just manage the way they were managed. In a lot of cases, or in this specific company that I’m talking about, some managers did one-on-one on a weekly basis, and some did it on a monthly basis. They don’t have forecasting meetings, they don’t have deal review meetings. The one-on-one meetings turn into a deal review meeting. And pipeline meetings, nobody’s really responsible for the pipeline. QBRs are not even doing that.

(35:13):

And we know, you’re coming from Salesforce, that’s Monday morning, you have a team meeting.

Randy Wootton (35:20):

Oh yeah.

Roee Hartuv (35:22):

Everything, that’s the cadence. I presented that to them and some of the frontline managers were making comments, “I don’t know if they’ll adopt my recommendation.” Which, by the way, is completely aligned with the leaders, with the executive team. That’s what they asked. All of a sudden somebody tells them, “Hey, Monday morning team meeting, you have to meet 30 minutes at least once a week with every rep. You need to listen to calls. Here’s the QBR template. You need to start implementing that. We missed this one, but Q1, you guys need to introduce that to your team members.” That change is difficult.

Randy Wootton (36:01):

Yeah, and I think the key insight there, and there’s a great author, Linda Hill, professor at Harvard who wrote a book on this, and I’m totally forgetting what the name of it is. But her essential point was that people get promoted to manager are probably people who shouldn’t be, because they’ve been incredibly successful as individuals and they know what needs to be done. Then all of a sudden you become a manager, especially as a sales manager, and all of this stuff feels peripheral, it’s not essential. What they don’t realize is that most of their team are going to be people that are either early stage professionals or B-level AEs, and their value as a manager is to unlock the potential of the people and the team. That is a different way of thinking about what their role is.

(36:40):

I think I’ve had sales managers who’ve gone back to become AEs because they make more money as an AE and they don’t want to deal with all the people issues. But everyone thinks the trajectory is you got to be a manager, and then a director, and then a VP. And it’s like, “Well, yes, if you like doing these sort of things.” Then having a company like yours helping you learn, what is the playbook for how to become a successful sales manager, and then a sales leader, and CRO is one of those career transitions that is critical. And you can still make a lot of money and not do it, but if you want to scale, if you really want to move forward in your career, to your company’s name, Winning By Design, you have to have a design.

Roee Hartuv (37:18):

Exactly. Now I want to connect what you just said to what we talked about earlier, connect that to the SaaS recession. Most of the frontline managers today have never experienced what we’re… They’re in there, and they haven’t experienced that. A lot of the frontline managers were doing fantastic as individual contributors in 2019, and 2020, where everybody was buying from everybody. And in a lot of cases, if you just had a good product, it wasn’t very hard to reach your quota. All of a sudden it’s a different industry, it’s an entirely different industry.

(37:59):

Now, I joined the workforce in 2006. I didn’t really understand what was going on in 2008. I can’t say I’m one of the veterans that have experienced that, or the dot com era. But a lot of the frontline managers right now, they joined in 2015, or 2016, right? They did this individual contributor for a few years and then got promoted. They have never experienced that. And it was easy to sell back in 2020, now it’s not [inaudible 00:38:34].

Randy Wootton (38:34):

Jason Lemkin from Saastr has a great set of expressions there. In 2024, it’s gotten hard.

(38:40):

But well, great. Well, Roee, this has been awesome. Just as we wrap up, I’d love to do the speed round. The speed round, as you may remember, is what’s your favorite metric and why? What’s your favorite book, it could be personal or business, and why? And then who’s the influencer that you’re following? Either LinkedIn or through email. Someone that you find that’s actually writing cool, interesting, new stuff. Not just part of the echo chamber. So favorite metric, what’s your favorite metric?

Roee Hartuv (39:06):

NDR.

Randy Wootton (39:07):

Okay. And for people who don’t know, NDR is net dollar retention. Why is that your favorite metric?

Roee Hartuv (39:12):

Because I think that indicates the health of the company. Basically, that’s the renewal rate. How much of your customers continue with you? And that’s the greatest indicator of, yeah, you’re delivering impact to your customers, they want more of that, you’re doing something right. And I think that’s the best indication of a healthy company offering.

Randy Wootton (39:39):

Got it. So beyond what we were talking about early on, which is gross retention, which is just can you keep the current cohort of customers at their spend level? NDR being they’re buying more from you. Either more seats, more modules, or you’ve penetrated the organization by going across the vision. You’ve demonstrated value and they want more. Okay, what’s your favorite book?

Roee Hartuv (39:58):

It’s not a business one. I don’t know if it’s all-

Randy Wootton (40:00):

That’s fine. We’ve talked about fantasy, science-fiction, and horror on this podcast. What’s your favorite book?

Roee Hartuv (40:06):

Yeah, my favorite book is Catch-22.

Randy Wootton (40:08):

Cash? Oh, Catch-22.

Roee Hartuv (40:10):

Yeah.

Randy Wootton (40:10):

Oh, brilliant. There you go, a little throwback to Catch-22. Why is that your favorite book? It’s an interesting call.

Roee Hartuv (40:18):

Anti-war.

Randy Wootton (40:19):

Ah, there you go.

Roee Hartuv (40:23):

[inaudible 00:40:23]. A lot of sarcasm there. I think I read it like five, or ten different times. I don’t know.

Randy Wootton (40:29):

Have you really? Oh God, yeah. No, I do think it’s a sophisticated read. You have to be able to, to your point, understand the multiple levels of it, and how it plays out. And it’s really compelling. Great, great, great recommendation. Okay, influencer? A person that you’re reading or listening to on podcasts, or reading their emails, that you think is really thought provocative?

Roee Hartuv (40:52):

Yeah. Probably you’ve heard that a lot, but Scott Galloway, Professor G.

Randy Wootton (40:57):

Oh, yeah. Awesome.

Roee Hartuv (40:58):

I just love it. Him and Kara Swisher are my go-to podcasts. I listen to every podcast. I just love that. I think he’s very thought-provoking. I love his view and how he analyzes different things. I think he’s fantastic.

Randy Wootton (41:20):

Wicked smart, irreverent, funny. Huge ego, but at the same time, self-effacing.

Roee Hartuv (41:25):

Exactly.

Randy Wootton (41:27):

For people that are listening, this may come out after, he’s got a conference coming on around AI, I think it’s this week or next, and I’m really excited. Because I think he asks really good questions, it’s not just the same that everyone else is. Well, Roee, this has been great. Thank you very much for your time. Really appreciate your insights.

Roee Hartuv (41:43):

Yeah, thank you for having me.

Randy Wootton (41:45):

And just as we wrap up, if people want to find out more, is LinkedIn the best way to reach you? Or how would you prefer?

Roee Hartuv (41:52):

LinkedIn is the best way, yeah.

Randy Wootton (41:59):

I think that’s how we got connected.

Roee Hartuv (41:59):

And [inaudible 00:41:59] the website of the company, if you want to go to directly to the website.

Randy Wootton (41:59):

That’s Winning By Design, and it’s an awesome website… Awesome website. It’s an awesome company, an awesome approach. We are, as I mentioned, customers. It took me a long time to get over the investment, but I will tell you, I just went through my QBRs with my AEs and they all said it has been a worthwhile investment. But to make it pay off, to your point, it has to be inculcated into the process and technology. We’ve adopted the SPICED framework in our Gong. We’re monitoring calls using it. So it has to be an entire behavior change and commitment to doing things differently for it to work.

Roee Hartuv (42:32):

Exactly, yeah. We haven’t found the magic potion on coming into a company and after three to six months changing everything and doubling the revenue. It takes time, it takes changing people’s behavior, cultures, and processes. It takes time.

Randy Wootton (42:52):

Yeah. And to your broader point, the final comment is, that the people who do this and survive it as sales managers will be great sales leaders in the years to come.

Roee Hartuv (42:59):

That’s right.

Randy Wootton (43:01):

Awesome. Well, thank you, Roee. Have a great day.

Roee Hartuv (43:03):

Thank you.