How to do customer development and when to hire your first rep

How to do customer development

When to hire for sales at an early stage SaaS startup

Before I dive into customer development, I wanted to quickly touch on when to hire your first sales rep since I didn’t really explain that fully last week.

This visual from Jen Abel is a great representation of the rough timeline that makes sense for founder led sales vs. scaling sales.

Assuming a mid-market ACV in the $15-40k ARR range, you’ll want to get to 10-20 customers through founder led sales prior to bringing on your first two AEs. You should default to then hiring individual contributors and getting at least two sales reps to productivity prior to bringing on a Head of Sales/VP to scale the team out further.

These rules are by no means hard and fast, but the main point should be that founders need to own GTM early on and will likely be intimately involved through >$10m ARR and beyond. Happy to answer other questions on this and definitely check out Jen’s twitter account as she lives and breathes startup GTM.

How to do customer development

One area of startup GTM that I’m fascinated by is customer development at the inception stage of a startup. Founders all too often raise an initial round of funding based on prior experience and track record with a problem and then immediately shift to hiring engineers and building post seed fundraise.

I strongly encourage founders to resist the temptation to build early on and instead spend a significant amount of time doing customer development. So what does customer development actually mean and how should you do it to gain conviction on what to build?

Step 1: Identify your target persona

If you’ve raised a seed round, you’ve likely spent substantial time directly experiencing a problem or researching a problem. You also likely have strong opinions about a specific target market to attack. What may be slightly less well understood is the likely ideal customer profile both in terms of type of company within that market and then the buyer/decision maker within that market.

You should attempt to get as detailed as possible here, for example if you are considering building vertical software for dentists, you should think through the ideal size of the dentist office (individual owner or a large organization like Heartland Dental with thousands of employees), who directly benefits from your product (eg. the Head of IT) and where these companies are located (US, Europe, Asia, etc).

Ideally you can come up with a very targeted list of 100-200 companies and buyers to start with to target for step 2.

Step 2: Customer discovery calls

This is a critical step and in future newsletters I’ll go into more detail on how to run this process. The goal for customer discovery is to talk to unaffiliated prospective buyers about their core problems without influencing them by sharing your solution early in the conversation.

Your goal should be to understand if the problem you are tackling is actually a core problem and whether there is willingness to pay for a solution like yours. There’s obviously nuance here: if you are building a direct competitor to an existing product/service that is budgeted, you will likely want to focus on whether the buyer likes that product (ie. NPS/CSAT). If you’re creating a category, you’ll need to validate that the problem you are solving is mission critical.

My personal preference is to blend together qualitative and quantitative questions with an end goal of gaining conviction on whether you’re working on the right problem and there’s willingness to pay to solve it.

Step 3: It’s time to build

As part of your customer discovery, near the end of the conversation so you don’t introduce bias into your problem identification process, you should introduce your proposed solution. The goal here is to understand:

1. What is the minimum viable form factor to deliver a product the buyer is willing to pay for?

2. What are table stakes integrations, security/compliance considerations and core functionality?

3. Will this buyer commit to being a design partner/early customer? Why or why not?

In my mind, this part is less important than gaining conviction around the problem you’re addressing. Finding a problem that isn’t adequately solved will often lead to product solutions you may not have previously considered!

If you’re going through customer discovery right now, let me know! I’m always interested in hearing what’s working or not working well.

Three interesting articles

1. Sales is still getting harder

I’m a big fan of what Matt Harney is doing at Cloud Ratings. He also has a fantastic newsletter and in a recent post he highlighted some research across a few metrics of SaaS sales. In particular, the selling environment has remained challenging and sales reps are still seeing declining quota attainment into 2024.

This is important for early stage startups because it increases the degree of difficulty for early stage sales and for hiring the first few salespeople at your startup.

2. Invalidation is a good thing

I mentioned Jen Abel at the top and she recently had a great quick post on invalidating hypotheses which is worth a read.

3. The first sales rep at a SaaS startup, challenging yet rewarding

This classic post from Jason Lemkin on SaaStr walks through the pros and cons of being the first sales rep at a SaaS startup. Two points that stand out to me and are relevant for both founders and sales reps:

The entire post is worth a read, but it’s important to recognize that early on leads are almost non-existent and you basically need to be a “full-stack” AE to be successful as the first sales hire. It’s not for everyone, but if you succeed in Jason’s words “Often times, the First Salesperson goes on to just amazing things in successful start-ups. And they have a special relationship with the founders and early employees that Reps 10, 20, and 200 will never have.”

First GTM Hire Jobs

• LaunchDarkly is looking for a GTM Lead for New Products. A bit different than the first GTM hire, but similar in a lot of ways.

• Greylock, a top VC firm, is recruiting Founding AEs on behalf of their portfolio companies.

• Pump.co is building a way for companies to save money on cloud spend and they’re hiring for a Founding AE.

• Vimcal, a scheduling app, is hiring for a Founding SDR and they are ok with recent college grads (ie. no sales experience required).

Closing thoughts

I will continue to explore topics like customer development and getting from $0-10k MRR via founder led sales as well as how to recruit and enable your first GTM hire. If there are other topics you’re interested in, please let me know by replying directly to this email!