5 Great Reps & 5 Great Devs

In the chase for super rapid scale out of the gate - to meet some awesome T2D3 model that you think is required to attract the best investors, many venture-funded founders do the following because the VC community has trained them to do so as they start to approach their first $1m in ARR:

• Paint a picture in which they have hit product market fit and now state that it’s time to scale up the company across all functions
• Start to believe their own slide decks that they actually have repeatability
• Worse, believe that their capacity-based financial plan is real - i.e., if we just hit 80 percent of the assigned street quota, then wow.?
• Proceed to rapidly hire across all functions, especially in GTM, increasing the company’s burn dramatically in the hopes that growth is sure to follow

Then reality sets in. For many companies, building repeatable consistency after the $1m mark is tough because these companies are still babies.?

If the goal is to get $100m in ARR, then at $1m in ARR, these companies are one percent of the way along their journey. In human years, with an average life expectancy of 77 years - one percent equates to 9 months old.? So, instead of kidding ourselves that a 9-month-old is ready to crush it on the playground and in the classroom, let's slow our roll.?

Crawl-walk-run works for kids, so why not for startups? Founders should build a steady baseline before pushing the go button on a hiring spree.?

That baseline for me comes down to the two most important roles at a startup or, for that matter, any software company - account executives and software developers. Those are the FTES you need to ensure you have a sufficient quantity of high-quality employees first and foremost.?

One quick rule of thumb: Unless you are a product-led GTM organization - as you approach 25 / 50 / 100 employees and beyond - 20% of your employees should be AEs, and 20% of your employees should be developers.? Anything less than that means that a) you are spending too much money on other functions/roles, and b) you are not investing in the basis for growth - i.e. great product and great sales capacity.? When I encounter companies that state that they can not “afford” to have such ratios or can not “make” that number of AE’s successful, my guidance is for them to pause and review their business deeply as something is likely off from a product/market/customer fit perspective.

For founders at the $1M to $3M ARR run-rate, where historically much of the initial sales and product come on the back of heavily founder (s) selling and coding, my advice to them before hitting the go button on any massive incremental hiring/cash burn is the following:

Get first to a point where you have five great sales reps and five great developers.?

By great, I do not mean from just a skills/experience perspective.?

Are they starting to deliver results? Are the account execs routinely hitting 50K a month in new bookings? Are the developers routinely shipping high-quality, impactful code that customers love??

Have you started to build the basics of the scaffolding needed for those two audiences to succeed?? This is not a knock across other functional organizations and activities but they live IMHO to serve those two audiences.? For sales, are you clear on your ICP? Are you generating the pipeline needed? Does your pricing and packaging nail the right balance between value capture and sales velocity? Is your differentiation and economic value proposition crisp?

For developers, do you have a cogent product strategy/roadmap that delights customers? Do you have the semblance of a release process that is predictable? Do you have a CS motion that nails implementation and drives high-adoption customers?

This takes time and a lot of trial and error to get right.??

Do whatever it takes to get to 5 great reps and five great developers before you 1) go much beyond 20-25 employees at your company and 2) start to step on the cash burn pedal.

If the answer to the question of whether you have five great reps and five great devs is no, do not start running. Keep crawling and walking.? If the answer is yes, you have natural signs of repeatability and a recipe to spend that precious, highly dilutive capital.

And remember, as you grow, stick to the rule of 20% moving forward.