Risk and reward rule
Why is it hard to find good sales talent to work for a startup? It’s pretty straightforward.
Salespeople shy away from startups mostly because of economics. True, other cultural and self-selection related reasons may contribute, but the financial side provides more than enough explanation.
Although no one is a utility-maximizing machine, it is most helpful to understand this in terms of cost/benefit analysis. While most salespeople don’t think in explicit terms of expected value calculations, they do make crude probabilistic judgments about what will leave them better off. And they are more likely to end up much better off in economic terms with a job at Tableau or DocuSign than they are at some seed company with an unproven business model.
It starts with the upside. A startup rarely offers as much gain as the alternative. In a new company, it is impossible to know whether you have much chance of earning commission, since so little is understood about the sales model, pricing, and product/market fit. When you couple this with the high failure rate of startups, it’s clear that your to ability make much money is mostly out of your control. Sure, they dangle the promise of riding the back of a unicorn to riches. But it’s vanishingly rare that the stock grant is large enough and the growth is explosive enough and the dilution is low enough and a the salesperson’s tenure is long enough for this to all pencil out.
Contrast that to more mature firms, where sales targets are much more likely to be attainable. A candidate can even investigate this beforehand by looking at Glassdoor, tracking down current or former staff, or asking for evidence of performance distributions. Top performers will walk in with at least some measure of confidence that they have a solid shot at a handsome reward. The upside potential thus strongly favors the mature firm.
To top it off, the relative downside at a newco is pretty unattractive. For the reasons mentioned above, startup reps run the risk of collecting zero or quite low pay. They may not even get benefits. Later stage companies pay better bases, and usually pair these with solid benefits, which together act as a kind of safety net. To make the contrast even more stark, most startups fail, and the tendency is to blame sales first. This means that even talented sales professionals in new companies face a high likelihood of getting fired for low performance. The professional costs can be severe.
Given that so much of the early stage performance is out of their control, you can see their reluctance to roll the dice when compared to the surer path at a more mature firm.
In probabilistic terms, the downside risk in a startup exhibits fat tail characteristics, coupled with an asymmetrically low probability for large upside gains. Compare this to a mature company, where risk matches a more normal curve. This makes proven companies much more attractive.
Who remains
As you can imagine, this means that there is a shortage of top talent available.
There are exceptions, of course. A few outstanding sales professionals work in the early stage world. They might love the thrill of hacking their way through the wilderness to discover a new business model, or need the motivation of great, novel products to keep them going. But they are few and far between. VCs probably know them, and likely save them for their most promising bets. You might manage to find them and reel them in, but betting your future on this is foolish.
Much of the talent that remains is either second rate, or unproven. The experienced but low performing folks are especially difficult because they are expensive and likely to punch below their weight. The unproven ones have some real potential, but the odds of finding any one of them make this complicated. In later posts, I will share more on what you need to do about all this when it comes time to hire.
What this means for you
So here you are. You might be a scientist, or a technical founder. You may literally have no idea how to “do” the business side of the business. Or perhaps it is not quite so foreign to you; you might be a product person, which puts you much closer to the mark. But your skills make you better at interrogating the market and building for it, rather than convincing it to buy what is already built. And if you are an MBA style founder, you probably already have a set of very specific skills, like finance or strategic assessment. While you probably know how to present information, it is rare that MBAs or the hot jobs they first land involve learning to really sell.
In other words, unless your product is flying off the shelves, you probably need help.