Hard sell: start-ups struggle to win sales staff
Source: Financial Times, published on 23 April 2018
Raz Ghafoor is the first to admit he lacks serious sales experience — unless, that is, you count a stint working as a retail assistant.
Yet the 25-year-old has just added the role of salesperson to “everything else” he does at ThirdEye, the company he co-founded two years ago, which uses machine learning to help retailers track their products on the shop floor and reduce theft.
How is this new task going? “It’s really hard,” says the chief executive. “I underestimated it. ”
In retrospect, he sees he was naive in assuming that selling would be straightforward: “I thought people [would] like the product, people [would] buy the product.”
It has been a steep learning curve, from pitching the company’s vision to venture capitalists to selling the end-product to retailers. Venture capitalists, he says, are used to talking to start-ups, whereas retailers are not — and are likely to be more risk averse. A retailer might have to consult various divisions of the business before agreeing to buy a product which does not have a long record.
"People think they [can] build a product and people will come …That’s rarely true in business to business" - Laurence Garrett
While Mr Ghafoor says his sales skills are improving, he is searching for a specialist with previous experience to add to his seven-person company. Although he has struggled with the sales role, he thinks learning how to sell has better equipped him in his hunt. So far this has been through venture capitalists’ contacts and via networks and attending start-up and artificial intelligence events.
He may find, as other entrepreneurs have done, that recruiting a good sales person is no easy task. State of Start-ups, an annual survey of company founders by First Round, a venture capital firm, found sales leaders were “the most coveted and difficult hires”, with 26 per cent of respondents saying they were the hardest positions to fill, versus 24 per cent who cited engineering posts. The report also noted how costly “a bad VP [vice-president] of sales hire can be”.
Laurence Garrett, a partner at Highland Europe, which invests in information technology companies, says founders can be naive. “People think they [can] build a product and people will come. That can be true for consumer [products]. That’s rarely true in business to business.”
At least founders are looking at revenues, says Sarah Drinkwater, head of Google’s Campus London, a workspace and community for fledgling businesses. “A few years ago companies thought they could build a business and exit. Now they want to build a sustainable business,” she says.
"While we often hear about the demand for technical talent, selling is so critical, whether it’s to a client or fundraising" -Sarah Drinkwater
On a recent Google programme that gave six machine learning start-ups access to mentors, Ms Drinkwater was surprised to see that the most in-demand mentors were expert salespeople. They were sought out for one-to-one sessions with sales staff, but also to help founders improve their skills and find their first clients.
She says: “While we often hear about the demand for technical talent, selling is so critical, whether it’s to a client or fundraising, and there should be more awareness about how tough it can be to find . . . this type of talent.”
The challenge for a start-up, says Kevin Walker, senior director of employer insights at Indeed, a global jobs site, is the employer’s brand, or lack of one. Salespeople, says Mr Walker, are “coin operated”, or to put it another way, money driven. “It’s easier to get more money at a big company,” he says, noting that sales jobs at small businesses take significantly longer to fill than those at large employers.
"Our budget for sales has increased because we realised we were too cheap. I think that’s why we didn’t get the right people." - Kim Nilsson
This resonates with Kim Nilsson, chief executive and co-founder of Pivigo, which matches data science research and products with companies and organisations. While “engineers are excited about start-ups”, this has not been the case with salespeople. “We have made sales mistakes,” she says. Initially, the mistake was to set the pay too low: “Our budget for sales has increased because we realised we were too cheap. I think that’s why we didn’t get the right people.” While she says the company cannot afford a huge base salary, it can be generous on bonuses “as long as the sales happen”.
Ray Sturm, co-founder of AlphaFlow, a San Francisco-based automated real estate investment service, says that such generous compensation packages might constrain entrepreneurs. In the early days or years of a start-up, he says, founders’ goals are constantly shifting. Commissions would not only strain tight cash reserves, but might also unintentionally put the company at odds with an employee.
“You may recruit someone with a big commission target based on particular milestones, but if the company’s vision shifts and it now desires different milestones, you want the sales person aligned with what’s best for the company,” he says.
He suggests giving equity in the company as opposed to a cash-based incentive. “Your earliest sales people may not have any part of their compensation structure set as commission, but they’re incentivised to sell because of equity they have in the company itself.”
It may also be difficult for founders to discern whether those who are good at selling themselves at interview will prove capable of selling a product or service.
"Every time the team grows, we hire more experienced people and it gets more expensive" - Ryan Smith
Oliver Cummings, chief operating officer at Nurole, a digital executive recruitment platform, says start-ups need to find flexible salespeople who are comfortable with constant change, including pricing, products and approach. “As a result it is often founders who have to do a lot of the initial ‘hunter’ prototype sales and digital marketing, because that’s really difficult . . . [there’s] lots of failure, you need to be very resilient.”
Ryan Smith, co-founder of LeafLink, a US digital marketplace for wholesale legal cannabis, has found that as the company has grown, he has required different kinds of sales expertise.
At first LeafLink hired people from inside the legal cannabis industry, who had worked on retail operations or on products. “At the beginning no one knew who we were. Getting buy-in from the industry was important,” he says. As the company has expanded, it has recruited people with a tech sales background. “Every time the team grows, we hire more experienced people and it gets more expensive.”
Meanwhile, Mr Ghafoor is continuing his search for the right salespeople for ThirdEye. “We don’t have a template to sell from and [a salesperson] needs to understand the technology. The danger is that they oversell or undersell what we do.”
How to hire start-up salespeople
New entrepreneurs can find it difficult to identify the right sales person, says Kim Nilsson of Pivigo.
She hired an ex-academic who wanted to make the shift to sales, because she wanted someone who could sell to clients who might know little about data science or its commercial applications.
“You need someone who can help [the client] understand what the project might do, someone who can think on their feet, sell and build trust. They might struggle to get a deal . . . because they don’t understand the industry well enough to convey the confidence to the client.”
The former academic failed to adapt. “I am [an academic] so I understand the struggles,” Ms Nilsson says.
“Whether you can move from one to the other depends on the personality of the individual. It is certainly possible, but requires an innate drive to learn and experiment.”
She has got better at running interviews. “We try to take them through mock sales situations, pretend to be the difficult client and see how they react.”
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