Why Anthropic Are Causing a Comp Crisis & Why You’d Never Hire From Salesforce or ServiceNow

Guys, it is so good to do this in person. We've done shows separately. We have some very exciting news today, which is why we're together in person. Thank you so much for joining me in person in London.

1. Chad & Chris Coming Together: What They're Building

Harry, it's great to see you in person. I don't think we've ever met in person, so I'm super pumped to meet you in person and be here with my buddy, Chad Peets. There are not many people I would fly to London just to spend an hour and a half with, so it is an honor to be here. Thank you for having us.

Dude, I'm so excited for this. I just want to start with the news of you guys coming together. Can you share a little bit about the news and what it means?

Yeah, I think Chad and I have been talking about this for years. After I left Snowflake, I sit on a bunch of different boards, and pretty much the number 1 pain point of any startup CEO is that they need help building a sales team. I started to try to work with other recruiters and was never satisfied because I was spoiled: Chad co-built the Snowflake sales team with me. I'm like, “Man, I'd love to figure out a way to get Chad involved,” and that's how the conversation started.

We were somewhat precluded from working together because I had restrictions on who I could work with, and Chris was working with separate companies. He would ask me to help certain companies, and I couldn't because I had conflicts with my other companies. So, we figured out a way that we could get rid of those conflicts and join up, and I think it's the best of both worlds.

There's some overlap between things that he's good at and I'm good at, but there are a lot of things that I can do and a lot of things that he can do. When you put us together, it's pretty fucking special.

I spoke to Matan about both of you earlier, and he said, “The lovely thing about you guys is you're like yin and yang. Chris is the really bad cop and Chad's the cuddly teddy bear.”

Correct. He nailed it. When you miss the quarter and you're expecting to be told off, he gives you a hug and says, “It's okay. Don't worry, numbers don't matter.”

2. Even the Best Product Leaves Money on the Table Without Great Salespeople

You said there about building sales teams, and it's the core challenge that early-stage and scale-up founders face. How has what it takes to build a sales team changed in a world of AI as we look at drastically different companies and different company scaling profiles?

In this age, you're seeing a lot of product-led growth companies, and there's a lot of order takers out there. I think the thing that Chad and I pretty consistently agree on is that if we can build outbound sales organizations, sales-led growth engines, and then pile in PLG on top of it, you have the best of both worlds.

So, I think our perspective—and I don't want to speak for you, Chad, but our perspective—is to build great go-to-market people, like we built at Snowflake, that he's built a thousand times over, that will differentiate the company.

Yeah, you still have to have folks that are willing to go do the heavy lifting. I think sometimes there's this notion that, “Look, we have an incredible product, and sales doesn't really matter because our product is so good, it's going to sell itself.” You definitely run into some of that. It's total bullshit.

Even if you have the best product in the world—let's say that's the case—you're still going to leave money on the table if you have shitty salespeople. To Chris's point, you still have to have salespeople that are going to go out there and find new business. That's been our core belief for 30 years.

3. Order Takers vs Hunters: How to Tell the Difference in an Interview

Help me out. We see people with great logos, whether it's any of the big names that we know, and often they are order takers. If I'm a founder, how do I determine if that logoed person is an order taker or if they were actually genuinely very good?

It's a question that every CEO asks me, and the simple answer is: give me an example of you opening up 2 to 3 new logos in the last 24 months. Then ask them next-level questions: Who was your champion? Who was the economic buyer?

But if you start going down that avenue and they start faltering, it means they're lying. So, you're looking for those people that have that experience of opening up new logos.

Then it's pretty simple. You can look at somebody's résumé. If a guy's been at Salesforce for the last 5 years, he's never opened a new logo. ServiceNow? ServiceNow. Right? Let's go hire people from ServiceNow. Why would you want to hire people from ServiceNow? They don't know how to do any pipeline generation.

Why do you say that, for people listening who don't understand?

Well, Salesforce has a monopoly. How much outbound are you doing if you work at Salesforce? First of all, everybody's already a customer. So, how many new customers are you going after?

You could talk to a guy at Salesforce. He's like, “Yeah, I closed Wells Fargo.” What? No, you didn't. Wells Fargo's been a customer for 10 years. You might be working on Wells Fargo, but you didn't close Wells Fargo.

If you talk to these sales guys and they work for a company that absolutely has a monopoly, how are they doing any pipeline generation? What I'd rather find is somebody that works for a company that nobody's ever heard of, actually has an inferior product, and was able to go to the market with an inferior product and win deals.

Totally agree with you, and I get that in terms of the inferior product. Whenever I'm hiring a sales guy, I look for people who've been at a tier-3 brand and done really well, because that's freaking hard to do. Otherwise, it's the brand.

We had—I mean, I won't name the company that we were just talking about—but Chad helped me hire the head of sales, and he was at a very mediocre company but succeeded there for 7 years. So, that's grit.

I spoke to Matan before the show, and he said that he was going to hire 3 regional sales leads. Then you spoke, Chad, to 1, and you were like, “This is the guy. This is the guy. Killer sales instinct.” How did you detect that so fast? What was it that shone out? For founders who are listening and trying to discover that, what should they look for?

4. Domain Expertise vs Sales DNA: Which Hire Wins?

First of all, everybody gets hung up on, “Look, I'm in this particular space, so I want to hire people from the same space I'm in.” I never look at that stuff. Whether you're looking for a regional VP or a chief revenue officer, to me, it's the quality of the sales organization in which you've operated.

Who have you worked for? What was the training methodology? What was the DNA? It's not the company. There are great companies with very shitty sales organizations, and there are shitty companies with world-class sales organizations.

So, the first thing you look for is: What quality of sales organization does the individual come from? Who trained them? Can I call somebody that I know and respect, that this person worked for, who says, “This person is world-class. They have grit, they have determination, they have all the things you're looking for”?

So, it's a different way of identifying talent.

I think that's a problem, too. A lot of people in the security space want to hire people with security backgrounds, and, for the most part, a lot of the security companies have historically been channel-only or channel-driven sales organizations. So, I actually have an affinity for not hiring people out of the security space.

There are some recent examples, like the team at Wiz, certainly a very good sales organization, but I think industry expertise does not matter as much as being successful selling an enterprise technology.

Does our mindset change around building sales teams when we have more technical products and we need sales engineers? Does that technical aspect become more central to the role of selling?

Yeah, I think it does. At xAI, for example, it was pretty important to us that we hire people because, when you're selling an API, it's not an out-of-the-box product. So, you have to be more technically astute when selling something like that.

You not only find people who are at least slightly more technical, or at least have sold more of a technical product, but you also change how you enable them. Our sales guys at xAI actually do all of their own demos, which, as you can attest to, is not the norm. So, yes, it changes the profile, but it also changes how you enable them.

We spoke before over message about 20M quotas for 11 reps, and I got so much inbound from that. I think quota setting is so hard for founders today when we're told we need to grow faster than ever. We see $500 million ARR bandied around so commonly. How do we think about setting quotas in this very new world?

5. How to Set Quotas: The Risk of Going Too High vs. Too Low

If you have a company and the founder says, “Oh, I should give them $2 million in quota,” my first question is, “Do you have any evidence to show that they should be able to hit that quota?” “No, but we're an AI company.” Well, who gives a fuck that you're an AI company? Show me the data.

So, from my perspective, if you're building a great organization, you have a fast-growing sales org, and you have north of $1.5 million of productivity from a rep who can onboard and, within 6 months, do over $1.5 million, keep hiring faster and faster and faster. If they're doing $3 million or $4 million, don't pat yourself on the back because that means you're missing opportunities.

You're missing opportunity in the market because they're just sitting there and they're fat and happy. They're just like, “Yeah, it's easy to make my number.” So, I think it's like, look, make it hard for them to get to $1.5 million and find those hunters. That's the kind of organization that will make you a very differentiated organization.

Is 4x to 5x still good, or has that changed now? I mentioned Clay earlier—we mentioned Clay—but she said there's this 8x to 10x, 11x, up to that. Historically, if you get 3x your OTE, you're pretty happy.

6. Quick-Fire Round

I agree it's probably going up because of different things that are happening in terms of being able to have a PLG lead source. I think when it comes back to quota setting, I always remind these CEOs: What are you optimizing for? Let's talk about the risk, okay? Let's talk about the risk of setting quotas too low. What happens?

You're probably going to overpay. That's a shitty thing to have happen, but can you live with overpaying a sales organization for 1 year? Because, understand, if you're overpaying them, what happens? It means you're blowing through whatever forecast you set. Now, again, you're spending too much, but you're pretty happy because you're blowing through the number.

Let's talk about the flip side of that. Set quotas too high. None of your salespeople are making any money. I've just brought in a world-class sales organization, and none of them are making any money. Morale is shit. What happens? The sales organization quits.

If you lose A players, you don't replace A players with A players. As soon as the A players go, the rest of the A players know that they shouldn't go there. So, now you're going to lose your sales org, and you're going to replace an A-player sales org with a B-player sales org. So, it's about optimizing for the right type of risk.

By the way, the other thing that we do now that we didn't used to do is put windfall clauses in there. Because there are certain situations, like some of the companies we're talking about, where you could have a rep go out there and find a $15 million or $20 million deal. I clearly don't want to pay that rep $3 million or $4 million in commission.

So, one of the things we've been adding is a windfall clause that says, “Listen, if we have the right as a company to look at a deal, and if you go do some massive deal, we get to talk about the comp plan and perhaps reset what you're going to make. So, you might still make $2 million, but you're not going to make $5 million.” We had that. I mean, at Snowflake, I had that windfall clause, and I probably invoked it 5 times.

Yeah. Can you imagine signing up the Pentagon for a $30 billion contract when you're on a draw and you're like, “Yep, I'll take my 20%—thank you so much.”

Yeah, exactly. And then here's my resignation as well.

7. Raising a Round Means Nothing: How to Keep CEOs Grounded

I'm retiring. Can I ask you—we see companies scaling faster than ever. If you're advising a CEO, one of my biggest problems that I see now is CEOs who, bluntly, get a little bit high on their own supply. They've raised a lot of money and revenue is seemingly scaling. What do you say to keep feet on the ground when sales are scaling fast, but it's a continuous game?

First of all, you have to remind them that raising a round doesn't mean shit. The fact that you were able to get 3 guys to write you a big check doesn't mean you've accomplished anything, and you have to constantly remind them of that because there are definitely CEOs that will raise a round and take a victory lap. It means nothing, and the right CEOs know that, but some CEOs don't.

So, first of all, you have to remind them of that: You haven't done anything. And then you'll get some of these CEOs that'll say, “Well, look, I'm doing this. I can get the best CRO in the world.” No, you can't. Okay, you've got good traction. Here's what those CROs are looking for.

By the way, there are 4 or 5 guys in the world that are the best in the world, and they can go do anything they want to do. Let me explain to you why you're not ready to get that guy. And you have to sort of reset expectations. Look, you've got good traction, there's good things happening here. You haven't accomplished quite as much as you think you've accomplished.

The other thing is, is your revenue sticky? Is your ARR sticky? So, all this monthly recurring shit that you see, it can be a head fake, right? Because there's no moat. He and I talk about this all the time, right? Go get booked contracts.

So, the first thing I say is, they say, “Look, here's my ARR.” I say, “Well, is it ARR, or is it annual recurring?” Let's talk about how you define ARR, because oftentimes they'll take monthly recurring and they'll lump it into annual recurring. You can't do that. And so, you really have to dig into a lot of this stuff to really understand the health of the business.

We're seeing this real opacity around revenue, and it's just murky around how most of it's calculated. Like, “My peak day was $10,000. I'm going to extrapolate that out. I'm now at $3.6 million ARR.”

One, you have naive founders and naive sales leaders who are then saying, “Okay, yeah, let's pay the sales team on monthly-in-arrears billing, and there's no commitment.” At Snowflake, I didn't pay the sellers until they got a booked contract—an annual contract.

It's silly to pay a sales team on something that's just an on-demand contract. No way. You should never do that, because it's not durable revenue and there's risk. And so, these founders are like, “Oh, look at this.” Well, dude, what happens if XYZ company or Anthropic comes out and replaces you tomorrow? There's no moat, there's no contract, there's no moat, it's easy to move.

These are things that are really concerning to me when working with these founders. With some of these companies, I actually find myself having to explain to them the value of having booked contracts. They're like, “They're paying monthly.” I'm like, “I know, but we need them to be booked.” Why? That creates friction in the sales process.

They get upset. It's lower margin.

Lower margin. Yeah, it creates friction in the sales process because I can understand the friction, right? If they just have to flip the switch and they can start doing it, but there's no moat there. So, there's no loyalty, there's nothing.

If you have a competitor and a month later the competitor comes out with a product or a feature that's better than yours, these guys will just switch off of you. The point of having a booked contract is—there are lots of points, but one of the points is that you have time. So, they can't just switch off of you the second something goes wrong.

But this was going to be one of my questions: Jason Lemkin from SaaStr, kind of a famous SaaStr master, said on a show recently with me, “Multi-year contracts partly mean less than ever because, if you don't have usage, they're essentially just deferred churn.”

Yeah, but I don't know, man. I don't agree with that at all. I think you have to go in and sell; in a consumption model, you have to get usage.

So, we talk about forward-deployed engineers. Okay, well, that's an ideal situation to deploy a forward-deployed engineer or professional services person, which I think is the right approach. Put a professional services person in and then get them to drive consumption of the contract.

The sales team needs to be incentivized to drive the consumption, not just to book the deal, but to drive consumption.

How do we feel about the enthusiasm around FDEs? I had Matt Fitzpatrick, who's the CEO of Invisible Technologies, which is a kind of billion-dollar company that sells data like Mercor and all the others. And he's like, “If you want to sell to enterprise, you have to have an FDE model.” Is that true, and is the enthusiasm around FDEs right?

It depends.

8. Is This Generation of Sales Rep Soft?

Yeah, I mean, it depends. I know a lot of people who think forward-deployed engineers simply make up for a shitty product. There’s something to that, right? There are big companies out there that just send hordes of forward-deployed engineers into those companies who are basically building the product they don’t have on-site and then calling it all one big product.

There’s a balance. I think there’s a world where they add a lot of value, but I think you can get carried away with it. The forward-deployed engineer is a glorified professional-services person, because if you’re a really good engineer, you don’t want to be a forward-deployed engineer. You want to work on the core product.

Then you go out in the field and develop some product there that may never make it back into the core product. As a customer, you’re left holding that bag, and you then have to support that product later on. There’s a lot of technical debt that forward-deployed engineers are going to leave, and there’s a ton of risk. Again, the forward-deployed engineer is not as good as the core engineer who’s building the core product. That’s just a fact.

Can I take it back? We said, what if it’s all going well? The flip side is, what if it’s going badly? What do you do when you have a sales team that’s not hitting goals, that’s not hitting target, and you need to motivate the troops? How do you do that?

I just had this conversation yesterday with a company that I’m involved in. He had a segment of his business that missed the number, and I said, “Okay, let’s look at it. Did every rep in that organization miss? Did every manager miss? How’s the second-line manager?”

It turns out that the problem is probably the second-line manager. You have to take action, because people are apathetic. If people get lazy—and I’ve gotten lazy. I got lazy. I brought Chad back into Snowflake because I got lazy.

Did he kick you up the ass?

He kicked my ass, man. He absolutely did. He called my baby ugly. But, dude, that’s what you’ve got to do.

How did you get lazy? I’m just intrigued.

I made too much money. I made too much money. I wasn’t doing the hard things. I wasn’t doing performance management like I used to, and I just expected everyone else to do it.

There were people in my organization who were not doing one-on-ones. They were not doing forecast calls. That’s crazy. That’s crazy. I was not inspecting that. That was my fault, 100% my fault.

Chad helped me light that fire again, so I brought him back in.

Thank God, Chad. He needed a kick up the ass. I was thinking he was getting lazy.

I mean, look, Chris and I had this conversation 2 or 3 weeks in, and I said, “Okay, I’m in. I’m finding shit. I’m going to go find a lot more shit. I’m going to expose it.”

Can I ask, what is the shit, just so I understand?

9. Are VCs Any Good on Boards? Mostly No

Some of the things he’s talking about: people just weren’t in their businesses. You talk about, “Okay, how many one-on-ones are you having?” Well, they’re not having one-on-ones. What are the leading indicators you’re looking at in your business? We’re not. How many new meetings are reps expected to have? Eight. What happens if they don’t? We’re not monitoring it. Are you rolling out MEDDIC consistently? No, we’re not. How much time are you spending in the field with your team? Not very much.

Second of all, managers weren’t going on sales calls. There was a whole bunch of rot that was my fault. But other than that, it was pretty good.

Well, that aside, it was fine. It was good. But you know what? Culture was strong. The work-from-home Friday brought it out. Well, that was the other thing. Snowflake had a massive IPO, and so we had a bunch of rich people there who made a bunch of money and were just hanging out investing.

This is what I was saying to Chris before you arrived. I have so many friends at some of the biggest companies who are making tens of millions.

Does that make it much more challenging when you’re trying to build a sales team of ambition and hunger, when suddenly people are cashing out $10 million or $20 million in the liquid secondary market?

And, oh, by the way, they don’t have a quota. What the hell? What kind of organization is that?

Totally agree. Not having incentivization tied to performance? Of course. What’s the point?

It’s ludicrous. Think about it.

But if you look at the big names—I don’t want to name names—they’ve famously not had it tied to performance.

Not tying it to performance is a mistake. How do you hold anybody accountable? If I’m an A-plus and you’re a D, you don’t do shit. I work my ass off, I sell $50 million, you sell $10 million, and we make the same amount of money. You feel great because you’re hanging out, making a bunch of money, not doing shit, and you’re a loser—no offense—golfing every Friday. I’m busting my ass, kicking your ass, and I know I’m kicking your ass, and we get paid the same? There’s a word for that. It’s called socialism.

Socialism. Yeah, I knew you’d say that.

Welcome to Europe.

Lovely to have you in London.

It does not work. It simply does not work.

Until it doesn’t. These companies are saying, “Hey, look, it’s raining purchase orders right now,” but that day will change.

One-on-ones was one of the first ways that you said, “Oh, we weren’t having them.” What do you advise sales leaders on how to do one-on-ones correctly, how often they should do them, and how the best do them?

Every week. I think it’s actually a good way to use AI, because now you can get into Claude or whatever it is you’re going to use and say, “Tell me about their calendar. Tell me about their forecast.” Then, as the manager, you come in super-prepared and say, “Okay, tell me about these sales calls. Tell me about these deals.” You’re way more informed.

But, dude, it’s not, “Hey, bro, how are things?” That’s not a good one-on-one. A one-on-one is the manager asking really hard questions about how their business is going, and it’s really to hold the individual contributor, the frontline manager, or the second-line manager accountable.

That’s what was not happening. Those one-on-ones need to happen every single week, consistently. Consistency matters. If you’re showing up every month, they’re going to be like, “Yeah, they don’t really ask me tough questions.”

I’m doing 15 new meetings a week, but I’m not converting? Fire. I’m firing you. Why? Because, dude—

I hit the quota of 8 that you told me was good.

Yeah, well, dude, the reason that you go on 8 face-to-face meetings a week is to—

Oh, 8 face-to-face.

8 face-to-face.

Ah, face-to-face is different.

A good way to find out if a second-line manager is failing is to look at the travel schedule. If they are lowest on the totem pole on their travel reports, it means they’re not working.

When I came back into Snowflake, we pulled up T&E budgets, and it was like, “Dude, you run North America. You haven’t been on a plane in 5 weeks.” That’s a problem.

That’s much harder. Now I have to constantly be on a freaking plane.

Is there a direct correlation between success and flights?

Yes. 100%.

That’s why I don’t want to go back to being an operator, because I know the tax that my body will pay. I love that. Does the requirement for MEDDIC implementation change in this world?

I don’t think so. I think metrics matter. Someone said—I won’t name names—I was here in Europe and had a dinner with a very successful company, and the head of Europe said, “I don’t think MEDDIC matters anymore.”

I said, “Well, dude, no pain, no deal. No pain, no deal. No champion, no deal.” The way that you develop a champion is by looking at the metrics and showing them how to use those metrics to get the deal done.

MEDDIC doesn’t change. People want to say AI makes a difference. I don’t believe that at all.

Guys, I need your help, okay? I’m a whole company that you agreed to work with, and we need to build my sales organization, but we’re competing against OpenAI and Anthropic, who are slinging $10 million, $20 million, $30 million packages to great sales talent. Guys, what do I do?

I live this conversation I’m having quite literally every day, because Anthropic in particular is offering sums of money the likes of which we’ve never seen. I can’t say it’s wrong. They have endless amounts of money, and they just care about speed. If I were in that situation, I would probably do the same thing.

So how do I compete against Anthropic? If I have a rep and I’m going to offer that rep $600,000 in stock, and they’re going to offer $1.2 million, we’re going to offer the same cash OTE—call it $400,000—and they’re going to offer $400,000, how do I compete against that?

Number 1, don’t you want to go to a place that actually cares about performance, that actually cares about having a quality sales organization? Does that not matter to you? You can say that’s Anthropic. I could say, no, it’s not.

They have a group quota. You can be the best guy in the world at doing what you do, and you're going to get paid like the shittiest guy. What does that actually tell you? What it should tell you is they don't actually value having quality salespeople; they value having a lot of salespeople. Is that an environment that you want to go work in?

Politics aside, salespeople are capitalists. They believe in meritocracy. They want to be rewarded for their performance and their hard work. If you go to Anthropic, that's gone. If that doesn't matter to you, then go to Anthropic. I'm not quite certain that I want you in my sales organization anyway.

And so, that's how I compete against it. You talk about the upside of the OTE; you talk about going to a company that actually values the function in which you perform. A company like that, as well as they're doing, do you think they really give a fuck how good their sales organization is? I mean, they'll say they do, but do they? They probably don't. Why should they?

I think developing—if you're a go-getter, you want to learn. What did Chad say earlier? Who taught you sales? Go to a place that, if you're a salesperson, someone's going to teach you sales. If I'm hiring someone, I want to go hire someone from MongoDB or Wiz, or one of these companies, because those sales leaders develop their people. That's who I want to be my next VP of Sales.

You want to hire from MongoDB or Wiz because their sales leaders, although tough, are incredible, manic disciples who develop the crap out of their people and hold them accountable, and that's what you're looking for. What would you say to a founder: don't worry about missing the ones who do go to OpenAI or Anthropic, because the best don't want to anyway?

Yeah, I think you can make that argument. It's harder to make as they offer more and more money. The pitch that we're both making right now—come here, especially for development—is harder today than it's ever been. 10 years ago, I would sell on coming to work for a John McMahon company: we're going to train you, we're going to do this, and we're going to do that. That pitch is harder to land today because they're like, “Yeah, I hear all that, but I can go to Anthropic and make 5 times as much money.”

But, Harry, we talked about Factory. Chad and I are working together on Factory, and a lot of the Factory salespeople are some of the earliest salespeople that I hired at Snowflake. The common theme is they want to build something. They're excited to go build something, and they believe in the CEO. That's a material thing, and so I think you want to build something together versus just being, as Frank Slootman always used to say, passengers and drivers.

In these companies, pretty much everyone is a passenger because there is no accountability. You're not learning anything from a sales perspective. Eventually, that will come to bite you in the butt in your career.

We've talked about competing for talent with some of these frontier companies. You mentioned that you have that conversation daily with CEOs. What's the biggest challenge that you find yourself facing on a daily basis with the founders you work with? For example, for me as a Series Seed and A investor, it's the pricing that I have to pay at Series A: $2 million, probably $30–$40 million post. That's my biggest daily challenge. What's your biggest daily challenge?

Recruiting. Building sales teams. It's the number-one pain point. This is why Chad and I are working together.

Are there enough good salespeople?

There's a lot of salespeople. Finding the good ones and building great organizations is hard. It's really hard, and it's expensive. That's the other thing, too: first of all, we're expensive. So the first conversation is, “Wait, you guys want what?”

We're capitalists. We're performance-based.

Yes, we are performance-based, but we are not cheap.

How do you structure how you work with companies?

We get equity. There's cash that covers just the expenses of recruiting because the guys on the recruiting team are the best recruiters in the world, bar none. But they're not cheap, so we need the cash to cover their expenses. The way we make our money is we get an equity grant tied to 4 years.

I say the same thing to everybody: “Look, we're going to get in there, and you're quickly going to realize that we are going to change the outcome of your company. You will see after a month exactly what you're getting. By the way, if you don't, no problem. You fire us.”

I've got a question for you. I love both of you, but you're both pretty opinionated. What do you do when you come into an organization and the existing sales org probably isn't up to scratch in a lot of cases, and then you're the enemy? What happens then?

I think Chad says this pretty much—I mean, he's more blunt, you know.

He's more blunt than you?

He's more blunt. But he'll tell you before you hire him that he's going to replace the entire sales team.

What do founders say?

Every CEO conversation is, “Can I work with this guy? Is he a killer?” You're kind of feeling me out, I'm sure, and he's feeling me out, too. Oftentimes, I'll refer them to our interviews and say, “You should watch this so you understand what you're getting with me, because I'm not everybody's cup of tea.” A lot of people watch that and say, “Yeah, we shouldn't work together.”

We're good.

Did they say that?

Oh, for sure. “Oh, no, man, you're fucking crazy.” Listen, that's why I told you to watch it. The other ones will be like, “This is exactly what we need in the organization.” So that's a good qualifier.

Then I'll go through their sales organization and say, “Look, I've gone through the sales organization, particularly your chief revenue officer. I can't work with him or her. So in order for me to come in, you have to commit now that we're going to replace that person. If you're not prepared to replace that person, we can't work together.” And it's black and white.

Do you find companies are willing to let go of talent soon enough?

No. No. No.

How do you know?

Because it's a really hard thing. You don't want to be knee-jerk: you miss quota, you're out. But you also don't want to let it hang too long. Look, I had the fortunate experience of working for some pretty ruthless guys, in particular Frank Slootman.

Was he the most ruthless?

Yes, 100%. And I clearly remember this.

How many years did he age you?

A lot. A lot.

Chris is actually 27.

10. When in Doubt There Is No Doubt: How to Fire Quickly & Kindly

Yeah, exactly. But I clearly remember there was a very senior person that I had hired. He was not working out at all. And I told Frank, “I think I have a problem with this person.” And he goes, “You know, Chris, I'm old and I'm going to die soon, so you've got to do it now.” And I'm like—and he's like, “The problem you have, Chris, is you have too much empathy.” He's like, “When you have doubt, there's no doubt.” And really, I learned that from Frank: making those hard decisions quickly.

It actually does so many things. First of all, you get rid of the rot. Second of all, it makes other people better because all of a sudden you have a performance-based culture. You're getting rid of someone who's not performing, and people look up to you. So I've had to make very hard decisions—multiple senior people that I've fired throughout my career. I hate firing people. It makes me sick to my stomach.

Any advice for the founders? I hate it, too. How do you do it well?

With this senior person, I said, “Listen, hey, man, it's not working out, and I feel really bad, but this is not going to work out.” He goes—and his response to me was, “I can change.” And I'm like, “I've done enough research. You cannot change. It's not going to make any difference. We are not going to change our opinion. I am super sorry. You and I are good. We're good people. I'm not going to go talk smack about you out in the world, but this employment agreement is over, and here's my HR.” And that's it.

You have to say as little as possible, get in and out quick, but be kind. You don't have to be an asshole about it.

I totally agree. Do performance improvement plans ever work?

No. I've seen them work, but it's a rare occasion. It's a sign for you to leave.

Can I ask: we're seeing revenue scaling unlike anything we've kind of ever seen before. In that world, forecasting becomes more and more challenging. Any advice on how to do sales forecasting in a world where it's just up in the air?

It's really—

Could be 400.

11. Forecasting in Hypergrowth: The Bottoms-Up Approach

It's super hard. We've always done it. Forecasts have always been data-driven. You take a productivity model, and we can pretty much tell you with 90% certainty historically where you're going to end the year based on what you're getting per rep, how many reps you hire, what the attrition rate is, and what the ramp rate is. So you build those. The problem is, in this world today, first of all, doubling is not good enough.

So, going from $50 million to $100 million 5 years ago, everybody would be super excited. Today, you go from $50 million to $100 million in a year and you might go out of business. It’s just a different world.

You have to have some balance. You can’t throw out the old way of doing it—the data-driven approach—because I’ve seen companies try to do that. I’ve seen them raise off numbers where they said, “We did $50 million last year. We’re going to do $300 million this year.” I’m like, “Great, back it up. How? How are you doing $300 million? Show me the numbers.” They say, “We just feel like we can do $300 million.”

What do you want them to say? “Hey, each rep carries a $2 million quota.”

Yeah, not quota, but each quota is a function of compensation and productivity. Each rep is able to generate $2 million in new ACV. We’re going to have 100 of them, so we can do $200 million. You still have to use that approach, but then you have outlier deals.

Sorry, is it naive to assume rep productivity scales linearly with size? Do you not always see that degradation?

Snowflake was the first company we’d ever seen where we couldn’t hire fast enough to bring the productivity number down. No matter how fast we hired, it kept going up. That’s when we knew—

What a lovely problem. We’ve got something.

I mean, we said it earlier, and I said it on your last podcast: we should have kept hiring. We slowed down. We slowed down.

Why?

Because we optimized to be public, and that was a mistake, in my opinion. By the way, my hand was on that wheel.

I was sitting down with a company that we both know very well, but I’m not going to name it because I got in trouble. They were saying, “Oh, we need to scale from 100 to 300 reps in a year.” I’m like, “Wow, you’re adding 200 reps in a year. It’s one every other day, almost. Is it possible to add 200 reps in a year at a Series B or C stage and not lose quality?”

12. Snowflake's Biggest Mistake: They Should Have Kept Hiring

Look, there are all sorts of rules you have to break to do that. For example, you never want a new manager to have fewer than 5 reps. You can’t scale the organization from 100 to 300 and not have that. What I mean is, if I have a manager with 5 reps on his or her team, 3 of those reps should be productive and 2 can be new. But if you try to hold to that, you start running out of places to put reps.

All of a sudden, you have to do things like have a manager with 6 reps, each of whom has been with the company for less than 90 days. [__] starts to break when you do that. Your ratios get messed up. Your enablement could have issues. You start cutting territories too quickly. “Hey, Mr. Rep, you came on with 50 accounts. 6 months later, you have 10 accounts.”

Can it be done? It can, but if you’re going to scale that quickly, the market better be massive and you better have a product that everybody wants to buy.

What do you think was the highest number of reps you hired in a year at Snowflake?

I think one year we went from 100 to 300.

Yeah, that was pretty wild. How many reps can you have under a manager?

Yeah, when you’re scaling, it’s 6. But at scale, if you’re not growing as fast, you’re not hiring as fast, and you have a bunch of productive reps who have been in the seat for 6 months or longer, you can have 8 or 9. Especially with AI, you can use AI to give you a bunch of data and leading indicators on what’s happening with those reps.

Do you ever find ramp or onboarding for reps to be well done by early-stage companies?

It’s really hard. I think the hardest job in technology sales is the frontline manager. The frontline manager is the key to the development of the reps because, in all honesty, your enablement at a Series B company is not that great. It’s not. You’re trying to do some stuff. You might have an enablement person. You’re going to teach them how to sell MEDDIC and everything like that, but it happens at the frontline manager level.

Developing your frontline managers and hiring good frontline managers is really, really important. There’s a company out there that I brought into almost every one of my portfolio companies called RevLogic, and all they do is build enablement programs for early-stage companies.

When is the right time to really invest in enablement?

Early. When you’re building a sales team. Early.

Is that $2 million in revenue or $20 million in revenue?

I don’t think you can pick a revenue number, but if you’re going to have 10 or 15 reps—for example, if you have 5 reps, you don’t need it—but if you have 10 or 15 reps and you’re going to 50, you better have it. You’re spending a lot of money building out that sales team. You might as well invest in developing them.

Is there anything specifically we can do to make sure reps ramp quickly?

Well, ramp is—remember, there are a couple of things that go into ramp. Number 1 is the sales cycle itself. To define when a rep is productive: if productivity per rep is $1 million per year, the first quarter they’re productive is the first quarter you can expect them to do $250,000.

People get this definition wrong all the time. The second a guy does a deal, he’s productive. Incorrect. It’s the first quarter in which they hit their full productivity number.

If you have a sales cycle that’s 6 months, how do you get the ramp time to less than 6 months? You can’t. The 2 things that go into shortening ramp time are the sales cycle itself and the enablement of the reps. You can do a good job of getting the enablement to happen within 90 days, but if your sales cycle is 6 months, you’re still going to have ramp time of 6 months.

What are the biggest mistakes you see founders make when managing those reps during that time?

I think they arbitrarily come up with numbers. As we were saying earlier, they’re like, “Oh, we should do $3 million because we’re an AI company.”

We talked about another company where they were like, “Oh, we don’t need real salespeople. We can hire—I don’t even know what they call the salespeople.” It’s like, “No, dude, you need—you can do weird things until you don’t, and things will end badly for you.”

My opinion is, invest in a great sales organization as soon as you can. Maybe I’m getting old, but I don’t like the gamification of the scaling game. What I mean by that is, “We need to hit $15 million because then we’ll raise $100 million and then $500 million.”

This is what I deal with every time I come into a company. They’re like, “We have to get to this number.” I’m like, “It doesn’t work like that. We have a bottoms-up approach. We’ll tell you what you can do. You can’t say, ‘This is the number we have to get to to get us there.’” It just doesn’t work.

It sounds like the dot-com boom. I moved to San Francisco in the dot-com boom, and it sounds a lot like the dot-com boom. Yeah, $15 million, and then we can raise at $500 million.

And they do, and that’s the issue. What about the margin? How about you’re reselling a bunch of large language models at a negative margin? How does that go?

Do you have that conversation with founders a lot?

100%. In fact, I’ve threatened to walk away from companies because they said, “We’re going to go raise at this number. This is the forecast we need to have to get to that valuation, so that’s what we’re going to do.”

I’ve literally said to companies, “If you go do that, I will leave,” because we are not going to hit that number. I’m looking at the number of salespeople. I’m looking at the productivity plan. That number is not realistic.

You might get lucky and get there. Forecasts are not supposed to be lucky. You’re supposed to put a forecast out with some level of certainty that you can get to that number.

13. 99% of VCs Have Never Operated: Why That's a Board Problem

You guys sit on boards with some of the best founders and some of the most exciting companies. Are VCs vocal enough when it comes to constructive advice and guidance with the companies they work with?

99% of them are not. They’ve never been operators, so they’re just regurgitating something they heard in another board meeting that they think might be—

I was on a board call for a seed-stage company, and one of the VCs got on and said, “When are we going to do our first million-dollar deal?” I was like, “Dude, how about you shut the [__] up?”

I mean, what value is that at all, right? I was once in a board meeting and they said, “I know what we need. We need more sales.” I was like, “Shit, let me just—more sales. So, what do you say? Sales?”

That’s the best advice I’ve ever heard. Jeez, thank you for that, Chris. That’s a good one.

What do the best board members that you sit on boards with do, on the flip side?

The best board members that I sit on boards with are the ones that know something in particular—product, for example—and add a lot of value in a particular area on that board, and offer their input. They’re involved in the business enough to have a point of view, which means not just showing up at the board meetings, but actually having conversations with people inside of the company in between board meetings.

They combine the knowledge that they’ve gained with the expertise that they have, and they use that to actually add value.

But they also understand their swim lanes. The board members that drive me fucking nuts are when I’m sitting in a board meeting and I have some guy on the board who’s a VC who doesn’t know fuck all about sales, who wants to chime in when we’re talking about sales, give us his suggestions, and start asking questions. I’m just looking at the guy thinking, “Can you just shut the fuck up?”

I think the best board member that I’ve ever seen is Mike Speiser. When building Snowflake, that guy was a founder of the company, and then he was so involved in the product. When he didn’t know about sales, that’s why he brought in John McMahon to be on the board of Snowflake. He knows what he’s good at, and he knows what he’s not, and he’s super valuable. He would literally probably be the best board member I’ve ever seen.

Yeah, Mike’s amazing. Mike is absolutely amazing.

And McMahon was the same way. I sat on 4 or 5 boards with John. John opens his mouth when we’re talking about sales, and honestly, that’s where I learned from. So, when I’m sitting in a board meeting and we’re talking about what I know, I’ll say what I have to say, and then I don’t say shit.

John doesn’t say a lot in the board meeting. He spends a lot of time with you understanding the business and telling you that you’re fucking up one-on-one so that you don’t go into that board meeting and become an idiot. He’s really good at that.

He’s also a very elegant gentleman. You know, I had him on the show last week. It’s like, “Oh, world-class.” Gosh. We said the word territories earlier, and I had the CRO at ElevenLabs on the show. He was like, “You kind of have to be global now, and you have to open everywhere and be everywhere.”

Obviously, you work with Harvey, and obviously you work with Legora. We’ll leave that one out. But they’re both opening everywhere. How do you advise founders when they have to be global in sales—not at day 365, but at day 1—and they have to open multiple locations at once? How do you advise them?

I mean, this is new, right? The way we used to do it is you nail North America, get North America to $100 million. You get North America to the point where it’s operating, you have some level of confidence, and you have a good leader who can run North America. That frees your CRO up, Chris, to go open other markets. You start with EMEA, then you go to APAC, but you do them sequentially so that you’re not spread too thin.

I agree that has changed. I’m seeing companies open up everywhere simultaneously, and I think it’s really challenging because it also depends on the CRO. Say you have a CRO who’s not accustomed to doing that, which is the case with most of them—it can really stretch them.

I think we both like to hire young up-and-comers to be the first head of sales. The problem now—this is a new problem—is that they’ve never run an international sales team. I had time. I was talking to one of the founders about this: I had time to ramp North America, hire a North American lead, ramp Europe, then ramp APJ. There is no time.

The founders are now paying CROs who have that experience enormous amounts of money—enormous. It’s crazy because they know that they have to get market share ASAP globally now. People like that, who are peers of mine and have experience like me, are paid quite handsomely to do that.

Being blunt, is it not actually just effective capital allocation to pay a CRO who’s done that—don’t kill me—$15 million, $20 million?

Oh, that’s a very low number.

That’s a low number.

You’re not even in the ballpark. You can see CROs today—and I’ll leave the companies out—I know CROs getting $100 million packages.

You know, I’m considering being a CRO.

You should. You should give it serious thought.

Would you endorse me on LinkedIn?

Yes, you should think about it.

That is not a real number. We’ve got a Series A company. You want in? Yeah, I’m $100 million bucks. I’ll be anyone’s. Are you kidding me?

No. Wow. Yeah, it’s crazy.

Is that good? I don’t know.

It’s a bubble. To me, this is a bubble, and honestly, Anthropic is inflating that bubble. Not that they’re doing anything wrong; they just have so much money they can spend, and so they are setting benchmarks that the rest of the market is trying to keep up with. More power to them, right? It’s better to be a CRO of a startup than it is to be a CRO of a publicly traded company.

Oh, 100%. You’ll get paid more.

Yeah, which is crazy.

Do you guys buy that SaaS is dead?

Some SaaS is dead. I don’t 100% buy it. When I went to Snowflake, enterprise was still in the data center, and IBM was still selling mainframes. IBM still sells mainframes. Legacy dies a slow death. People will still have Salesforce as their CRM, their source of record, but it’s changing.

14. Why European Founders Struggle to Build World-Class Sales Teams

I’m a traditional SaaS founder, guys. My sales team’s getting eaten away by—I think it was a load of people from Snowflake who have gone to Anthropic. I saw this LinkedIn post about it, and it was like, “This is savage,” the amount of Snowflake people going to Anthropic. What do you advise me if I’m a traditional SaaS company?

It’s a really difficult thing. I’ve been on emergency calls literally to discuss this. The problem is you can’t compete financially. What they are paying people is so far above what everybody else is paying, you can’t sit there and just counter these people.

But even development-wise, honestly, you can’t compete. If you’re at a traditional SaaS company, you’re not going to get the same learning experience that you’re getting at the coalface with Anthropic.

It depends on what you’re talking about. Learning what? If you’re talking about learning how to be a great salesperson, I don’t think you’re going to get that at Anthropic. If you’re talking about learning how to sell the products of the future, you’re right.

And so, what would you advise? Okay, switch hats now. I’m the sales talent. I’m not going to learn what a great sales organization looks like, but I am going to learn what maybe the best product organization in the world looks like at the cutting edge of technology.

It’s pretty tough. If Anthropic, for example, when they were at their $380 billion valuation, were offering reps, call it, $1.2 million, I’m not an investor in Anthropic, but if I recruited for them, I would make the case all day that you can 10x that stock. I think Anthropic’s a $4 trillion or $5 trillion company.

If you’re a sales rep and they’re offering you $1.2 million, and you could look at that and say, “I’m going to have $6 million in 4 years,” how do you tell someone in good conscience not to do that? It’s hard. I think it’s hard.

Culturally, you have to be okay being in this organization where, as you said, it’s a great product—an unbelievable product organization. Look, world-class, the best in the world. But you’re going to be sitting next to some mediocre people who are going to make a lot of money. Maybe they came 6 months earlier, so they’re going to make more than you, and you’re going to be super pissed about it. But fuck, $10 million will make you do a lot of things.

Maybe I’ll dance.

That’s right.

I had someone on the show the other day who said the $60,000 SDR is dead: the low-level, just outbound shit, low-level, low-quality. Compared with the $250,000 SDR—the full-stack, AI-ramped killer SDR—I’d rather have 1 of them than 10 of the low-quality ones. Are they still just setting meetings? Has the function changed?

Fundamentally, yeah.

But are they doing more than setting meetings? Are you talking about actually closing transactions, where they transform into an inside rep? Are you saying the SDR function of just setting meetings is still the same, but their productivity is higher because of AI?

No, I’m saying we’re needing them to go more full-stack, so it is kind of end-to-end.

Yeah. But would you rather have 3 end-to-end reps versus 30 before?

I think the one thing that you’re missing in all that is that’s the future of your sales organization.

Sales is always going to be smaller.

Potentially. I don’t know. Right now—

Right now, it’s the opposite.

The opposite. So, there’s no lack of demand for good salespeople. And if I’m a CRO, I want SDRs in my organization because they’re going to be my future sellers. I want to develop those people into my field sales organization over the next 2 to 5 years.

I don’t know if you saw Marc Benioff, but he’s like, “No more developers.” Yeah, salespeople welcome. Yeah, we want salespeople. Can I ask you: verticalizing sales teams has always been really freaking hard. Does verticalizing sales teams change today? And what’s your biggest advice to founders who are now contemplating when and how to do it?

I think if you’re an API company, for example, it absolutely changes for you because you’re talking about customized solutions. So, it makes sense to have customized solutions specific to a vertical, because you can go in there and repeat that motion.

I think for out-of-the-box products, it's less relevant, but I'm certainly seeing it happen faster than it has in the past. I think Snowflake did it a little bit too late, but because it's a consumption model, you have to actually understand the use cases, then go win those use cases, get those use cases live, and all sorts of stuff. So I think it's super relevant to have a verticalized sales team, but you have to invest in having specialists, and it's expensive to do it.

We mentioned the word consumption. Everyone talks about the future of pricing, and everyone kind of agrees that we're moving away from per-seat. Per-seat's dead. Per-seat is dead. Yeah, you ever speak to a traditional CFO? They're like, “No, no, no, no, no. I don't want variable pricing in this way. I need to know what my COGS are. I like the reliability of per-seat pricing.” How does pricing change in the future, and does how we sell need to change according to that?

15. Seat-Based Pricing Is Dying: The Shift to Consumption

I think they're going to have to. Every SaaS company that is per-seat is having the conversation right now of how they introduce some sort of consumption into their pricing model, because there's a risk that companies have fewer employees. Even though you might be gaining market share in terms of number of customers, you might be losing revenue because you're on a per-seat license.

A lot of times, the reason that Snowflake was a consumption model is because our underlying cost of goods was also consumption. CFOs didn't like it. They would try to force us into a traditional licensing model, and we said no. Tough luck, Mr. CFO. This is the new world. This is how it is.

It definitely changes how you think about the sale, too, because in the traditional world, it was, “Go book a deal and walk away,” right? The sales guy didn't have to care. As we experienced at Snowflake, you can't have that. The rep has to be invested in the long-term relationship with the account because they have to ensure that the account is, in fact, consuming.

Otherwise, they'll go book a deal, walk away, and the account doesn't consume, and the company's got a gross-retention problem. So you have to tie some of their compensation—most of it still to the booking events, but you have to tie some of it to the consumption—so that they are incentivized to make sure that they don't overbook deals and, at the same time, that the customer is actually consuming what they bought.

We were downstairs before this, and I showed you the video where I said work-from-home Friday is an excuse for a 3-day weekend. Do you find that this generation of sales reps is aware of the requirements to win?

I think there was a time when there was this entitlement among these reps, this generational issue, and COVID accentuated it and really started the 3-day workweek. I think now you talk to any college grad, and they're struggling to get jobs. That's changing their mindset, and a lot of these people who have these entitlements are going to have a bunch of young kids come up and steal their lunch because they're going to go out and want to work, because they're desperate to work.

So I do think it's going to change. It's a cultural issue, at least in the US. If I look at the US, as a country, we're soft. People have forgotten that we actually have to work hard to achieve the things that we've achieved in the US. I won't speak to Europe, because you know how I feel about Europe. I think it's far broader than just salespeople. I think it's an issue.

But I will say, over the last year or 2, I'm seeing it swing back. Some of the founders we've talked about that I worked with—in my personal situation, I'm working 70 hours a week. My wife doesn't talk to me that often because she's super pissed about the hours I'm working. You don't understand: everybody I'm working with is working 70 hours a week. That was not the case a couple of years ago.

Chad, why are you doing it? I mean this in the nicest way, dude. You don't need the money. He's a psychopath.

I love to work, and I love to win, and I love to be around people that are smarter than me, and I love to build incredible companies. I love it.

The thing that's genuine about Chad is that he's relentless, and sometimes that can be taxing because you sometimes don't want the feedback that he's going to give you, but he's generally right, and he will not let it go.

He's a dog that's chasing that bone, and he will not let that bone go. I'm very like Chad in many ways, but I've learned that people thrive on the carrot or the stick. I'm sure he's very good with the stick, but some people thrive on the carrot. That's why we're partners.

That's why we're sitting here together. That's why we're partners.

Is that it? Because I struggle with giving the carrot. Can you give both in one person?

You can't. I think, look, there are—

Does he ever give the carrot? No.

Come on. There's some. There is some. Chad is really good for me because I will try to be nicer than I need to be, and he'll hold me accountable to making sure that there is more stick in my delivery.

What I try to do is build a sales organization that was not a bunch of dicks. Chad respected that. He helped me build that organization. There are sales leaders out there that are dicks. They don't care that they're dicks, and they'll build an organization that is a bunch of dicks. That's fine, but that's not good long term for building a long-term sales organization.

Which organization has the most dicks?

I knew you'd ask that. I got in trouble last time I was on this podcast. I called someone a dick and a liar last time, so, yeah.

That went down so well.

Yeah.

You mentioned how you feel about Europe. I'm not deliberately teeing you up, but if I'm a European founder listening—as there are tens of thousands—what do you advise me, then?

I just think it's harder to find the types of people, particularly outside of the UK in Europe, who are willing to put in the effort that I think is required to be successful. I just think it's challenging, and I think it's very difficult to fire people in Europe, as you know. You want to hire in Germany or France or Spain, and then decide you want to fire somebody—it's next to impossible.

Having things like performance management and so on are challenging. I think Europeans have a different expectation in terms of work-life balance. I'm not saying it's wrong; it's just different. I think that can make it challenging.

I made plenty of mistakes in Europe. One of the mistakes was putting the inside sales team and SDRs in Amsterdam. As soon as you put someone on a PIP and say they're not working out, the first thing they do is go on sick leave. Then you're negotiating with lawyers. It's the worst. I mean, it's the worst.

So what happens then?

They go on sick leave, and then they come back for a day and go back out on sick leave. Then they're like, “Well, how much are you going to pay me?” And if you're in a company where the stock is worth a lot, they're going to be really painful to get exited out of the organization. It's just a pain.

We have one company, and they wanted to fire someone, but they couldn't. So they had to have them resign. The game was, “How can I make this person resign?” Every day, the CEO came in with a 1,000-page block of white paper and said, “Every day, you need to check that there's 1,000 pages and that we're not being ripped off.” Then, at the end, it'd be like, “I want to double-check that one.”

Did it work?

After 2 weeks.

Isn't that savage?

The best European performance-management story I have is about the guy who was my German country manager. He had an underperforming rep. That rep decided he wanted to go part-time, and German law allows him to go part-time.

He was trying to negotiate with him to get him to leave. He wouldn't leave. He wouldn't leave. So he said, “Great news. Every Monday morning, the day that you're in the office, you're going to drive 2 hours into Munich, and we're going to have a 4-hour, one-on-one development session. I'm going to develop you to be the best sales rep ever.”

He just grilled him for 4 hours. At the end of those 4 hours, the rep said, “I don't think I want to do this again. You'll have my resignation tomorrow.” He talked to his lawyer, and his lawyer said, “Well, you shouldn't do that.” So then our AM came back and said, “Okay, guess what? I'll see you on Monday.” Sunday night, the guy resigned because he just made it so difficult.

I think you just have to performance-manage the hell out of people and make it very difficult on them. It's also just a mentality. Nothing irritates me more when I get into these companies than when I see people whose mentality is, “What can I get out of the company for giving the least?”

Yes.

Drives me insane. I will tell you, when I got back into Snowflake, I saw it everywhere. It's like, “Look, we are here. We are privileged to get to work for this company. You're here to fulfill the critical role.”

I can tell you that's how I view my job. If I don't think I'm adding as much value as I possibly can, I will leave because I can't live with myself. I think you have to try to find people who are like that, but there are so many people who are just like, “Oh, it's a big company. Let me take and take and give as little in return as I can to get away with it.”

Do you think it's possible to have a large, thousand-person-plus company without that lack of attachment to the brand and to the company? I'll tell you: SpaceX and xAI have done an incredible job of having people who believe in the mission. Clearly, it's not 100%, but everybody there believes in what they're doing and wants to be there, of course, to make money, but they also want to be there because they believe in what they're doing.

What do you think they've done specifically to give people that belief and enthusiasm for the mission?

They hire for it. It's a big part of it. You get a very quick feel when you're interviewing there for what this thing is all about. They talk about the mission all the time, and they believe in what they're doing.

They believe that we literally are doing things to save the world. Now, you can question that all day long, but that is the belief: that we are doing things to change the world.

You're going to make a lot of money because you can work at a nonprofit and do the same thing, but you're going to make a lot of money at SpaceX.

Most likely.

Yes. What have you changed your mind on most in the last 12 months?

I think we talked about it before. From my perspective, it's going global as fast as you're going. That, to me, is crazy. A year ago, I would have said, “No way. Don't do that.”

Now you kind of have no choice. It's a sprint. It's a hyper-competitive market. I think the world of Matan at Factory, and I think he's got the right mindset. He wants to go and win, so he's just going balls to the wall, and that's what you have to do.

That's my biggest thing: I have to shut up when my instincts are saying, “Don't do this. Don't go to Europe. Don't go to APJ right away.” I have to sit back and say, “You have to do that now.”

What was your view?

I think when it comes to developing forecasting productivity plans, you need some flexibility to say, “Yes, the productivity plan says we can do this,” while recognizing that we likely can do more than that. You need some flexibility between this astronomical number that they think they have to get to and the data-driven number that says here, and you have to be willing to find some middle ground.

The reality is that at Factory, we're seeing things happen that we've never seen before: the size of the transactions and the speed at which they're closing these transactions. I've never seen it before.

Do you worry that we're at a momentary period in time where every CEO and CIO is being beaten by their board for AI implementation? For the next 12 to 24 months, every company in the world is in the market for the product. Take legal, for example. No law firm is like, “Nah, we're going to sit out the AI thing.”

Everyone is in the market for it, but only for 18 to 24 months will that be the case.

I think, like we said earlier, there is a bubble to this thing. But I also think it is life-changing. AI is changing the way that you can interact with technology, so I do think it's important that you build for speed and go fast. But this bubble will burst.

Do you buy that AI completely changes the sales-prospecting process?

Yeah, we've seen many people, from 11:FS to Artisan and Qualified. Jason Lemkin, the VC we discussed earlier, got rid of his whole sales team for his conference and has all AI SDRs and an AI sales process.

I don't know, man. I get 3 AI-generated recruiting emails a day, and it's embarrassing that these people put their names on them. You know what has not changed? If you have the guts to pick up the phone, call me, leave a voicemail, text me, email me, and call me again, there's nothing replacing that.

Because all these CIOs are getting inundated with AI prospecting, you can get rid of it, or you can leverage AI and invest in field marketing, do a lot of marketing events, and do cold calling. This still matters.

Chad is the case in point. He does not send emails or LinkedIn messages. He picks up the phone and calls anyone.

Yeah, my guys are not allowed to send notes. They have to call. It's the same thing. People get inundated with AI. They have to get the phone number and make the phone call.

Does the role of customer success change over time? Chris, you've always been very vocal about customer success basically being BS and being free professional services.

I think it's—yeah, 100%. I think because there's so much more intelligence you can get on usage and how the customer is interacting with the product, it should be way more analytical. It should be way more insightful.

It's not this kind of whatever. What customer success was before, who knows what it was. Now you have all these metrics that you can gather. It can suggest how you interact with the customer, suggest that you talk to them about these things, and show you that the customer is going to leave you.

There's a bunch of intelligence that it's going to do, so I think customer success could be completely automated to some extent once the customer is in deployment and in production. I think AI can definitely help.

Can I ask one final one before we do a quick fire? What are you thinking about a lot that you don't see people speaking or talking about much?

I think some of these compensation things we're talking about are not sustainable. What salespeople are currently being paid is not sustainable. You cannot pay salespeople this amount of money and have a company that's cash-flow-positive, and so on and so forth.

Right now, nobody cares because there's so much funding out there, and they're just looking at the growth numbers. Nobody seems to care about how much your burn is or anything like that. That has to change. When that changes, all of these comp models and all of this shit has to change along with it.

Does it lead to a hollowing out of that sales ecosystem, with, I don't know, 500 to 1,000 people making between $100,000 and $500,000?

Yeah, likely. I also just don't know what the world looks like, but there is a world where there are 5 or 6 super-relevant technology companies and not a lot else. I hope that's not where we land, but you could certainly see a world in which that is where we land.

In that world, there's not a need for a bunch of salespeople because there are only 5 or 6 companies.

Has working with xAI changed your perspective on the future and the dominance of companies?

For sure. Working with xAI, the SpaceX of AI, has been one of the great joys of my life. I've learned more. I actually learned quite a bit going back in with Chris at Snowflake the second time, but I have learned more about technology and where I think things are going.

So, I think the answer is yes.

What was the thing you learned?

There are just different ways of running a business. The way in which that company is run, I've never seen before. It's just different structurally, organizationally—everything is different.

There are times when you're like, “How can this work?” And then the next thing you know, it's working. So it forces me to recognize that although I've seen something be successful in the past, it's not the only way to be successful in terms of how you run the business.

Chris, what about you?

I'm thinking about all these questions around people saying the salesperson will be dead or SDRs will be dead. I just don't buy it. But it makes me think about things a little bit differently.

I talk to the people—I'm a year out of being at Snowflake—and things have changed so dramatically that it makes me paranoid that I'm missing out on things, for sure.

Do you think Databricks goes out?

I don't know. When they start selling stuff at negative margins, I don't know if they can.

I had to put it out there. Well, I mean, it's a fair question. Snowflake today is worth, what, $55 billion? Is somebody going to make the argument to me that Databricks is worth 2.5 times Snowflake? Nobody's making that argument to me. The public markets are quite different from the private markets right now.

100%. Remember, private markets take 3 guys to set your market price. Public markets take millions of people to determine your price. So, is the question, can they go out? Probably.

Can they go out at $150 billion, 10% above their last valuation? I’d like to see that.

What worries me, which I think most people aren’t talking about, is the contraction in liquidity options. Public markets are basically dead. You can’t go out with $200 million or $300 million anymore, for sure. Even $1 billion isn’t interesting. I know it sounds awful.

Two take-private buyouts are gone. Do you think Thoma Bravo is jumping back into another Coupa or Anaplan? Less likely. Then everyone looks at it, and an analyst goes, “Well, look at these big guys paying the money.” They’re so specific in what they want and why they want it. It’s not a deep enough universe. Where are the exit options?

I think that’s why you’re seeing companies do things that we’ve never seen before, like offer tender offers, continuing to raise financing and offer secondaries, because they’re effectively providing the same level of liquidity to their employees that they would get if they went public. Otherwise, there is no liquidity, and they have an issue.

That’s a new thing, right? You’ll actually see CROs negotiate into their comp plans that they have the ability to sell annually up to 20% of their shares in a tender offer. I’d never heard of that 5 years ago. Is that good?

I’m not sure. I think public markets are a good thing. I think markets are very efficient at telling us what a company should be worth.

When Snowflake was private, it was all about top-line revenue. That was what it was about. When we went public, it was all about free cash flow. The market still rewards Snowflake for generating free cash flow. I think that’s something you have to think about.

One thing that’s hard is, when people do have some liquidity, you get kind of second-class citizens. You often have the senior folks who’ve taken liquidity and made several millions and tens of millions, and then there are the newer folks who maybe haven’t hit vesting cliffs yet. You do have these 2 worlds. That’s tough.

I had the opportunity, since I was employee 13 at Snowflake, to have plenty of liquidity options along the way, and I took some because it made sense. Now, I wish I had taken more.

Regret it?

Yeah, a little bit.

A little bit. Yeah, yeah. What would you advise someone who has those options today?

It depends on where you are financially, but taking something off the table makes sense because there’s risk in everything. It made me less stressed when I took some money off the table.

When I say I regret it, I’m joking. I don’t regret it because it did allow my wife to be a little bit less stressed and me to be a little bit less stressed about our financial situation. I recommend everyone, whenever you can have some liquidity, take something out. Maybe it’s 5%, maybe it’s 10%, but do something.

Is your wife as pissed with you as Chad is with you?

No, because I don’t work as hard as Chad.

But that’s about to change.

About to change. That’s about to change, Chris. Yes, yes, yes. Life’s going to have to become a lot more intense.

No, in full transparency, I need a little bit of intensity. Working 20 hours a week isn’t all it’s cut out to be.

Okay, are we ready for a quick-fire?

Yeah, yeah.

What’s the most controversial belief you have about modern sales teams and how they should be built?

One of the challenges when you go talk to a CEO about building an enterprise sales organization that becomes controversial is the cost. When you say things like, “For every 5 reps, I need a manager,” that’s expensive. When you say, “For every 4 managers, I need a second-line manager,” that’s expensive.

When you say things like, “It’s going to take 6 months before you get anything out of this investment, and you’re going to invest in 100 of these people, and for the first 6 months of hiring these 100 people, you’re going to get nothing for it,” companies look at this and they’re like, “You want me to spend a shit ton of money.”

Then you say, “Right, and at the end of the year, you’re going to lop off 25% for attrition. We’re going to attrit 25%, which means the forecast is going to go down by 25%.” They see these numbers, and the first couple of years of enterprise sales are very, very expensive. In this day and age, that is very controversial.

25% attrition a year?

Yeah, that’s normal.

Are you serious?

That’s inclusive of promotion. It’s promotion, voluntary, and involuntary attrition.

Remove promotion. What’s that, 20%?

At least. Yeah, because look, every healthy sales organization should be attriting the bottom 10% every year. You should be getting rid of 10% of your sales force every year.

Do you think most companies are doing that?

No, no.

How do you do that? If I’m genuinely a sales leader, do I just say, “Okay, it’s December”?

No, you’re doing it quarterly. It’s quarterly. Every quarter, you’re looking at the team. You should be able to get rid of 2.5% of your sales organization every quarter.

Performance management is not an annual thing. That’s a lesson that I learned: you do have to continuously do it. You have to hold people accountable.

Do you worry about building a culture of fear?

Look, at Snowflake, we had a great culture, and early on we were firing people for underperforming. Like I said, you don’t have to fire people and be an asshole about it. You can let them go, wish them the best, and not be a negative reference on them.

Good performers actually like to see that you get rid of bottom performers because that means that they’re special, and it’s meaningful. If I’m an A player, is that going to deter me? If you tell me, “Hey, look, every year we get rid of the bottom 10%,” I’d be like, “You’d fucking better. If you don’t, I don’t want to come work there.”

Which private company has the best sales organization today, in your mind?

The best private company at scale—now, they were likely recently acquired—Wiz had a world-class sales organization under Dolly Rajic.

What made it so good?

Dali. Dali basically brought the entire team over that we built together at AppDynamics and Zscaler, and because Dali’s Dali, he brought all of them with him. They were operationally sound. He hires the right people. Wiz is a world-class sales organization.

When you hear that someone came from a public company and you’re like, “Uh-huh, they’re good. They’ve learned under a great leader,” you said Salesforce was like—MongoDB?

MongoDB? Yeah, MongoDB for sure. They’ve been pillaged because of that, but they developed their people, and that was a prime target.

What sales advice do you often hear that you think is nonsense?

It goes back to the controversial question that you asked. Hiring for industry expertise drives me nuts. You hire the athlete, not the industry experience.

This person is brilliant, but they really want to be CRO and not a VP of sales. Thoughts?

I would need more context. Do you mean they’re focused on the title?

Their focus is very much on the title.

Yeah, I just had a situation where this came up last week. There is some merit to wanting the title simply because it gives you a level of credibility, both with customers and when it comes to recruiting.

If you give somebody who is, in fact, the CRO a VP of sales title, you are sending some level of signal to the rest of the market that you don’t totally believe in this person. It may not be intended, but that signal will be received when you’re trying to recruit people.

It made it harder. I was the VP of sales for the longest time at Snowflake and not the CRO, and it made it harder for him to convince people to come and talk to me. Eventually, they promoted me to CRO.

If you give it too soon, it makes it incredibly difficult if you don’t scale into it. Then how do you deal with the demotion of that person? That’s why, especially if you’re the first head of sales, I like hiring them as a VP of sales because ideally, if the company grows really fast, they can be VP of Americas. They don’t have to be the CRO, and they can stay at the company.

How scalable is your model? You take very active roles and often sit on boards or act as board observers. How scalable is it actually?

I’ll take this one. Up until this point, for 30 years, it’s been me. I have a team that handles the recruiting. I handle all the board work and all the consulting work. I think I have 7 companies in the portfolio. I can’t take on any more.

The reason I was so excited to bring Chris on is, A, he adds value in so many places that I don’t. The reality is that operationally, I think I’m pretty good. I’ve sat on a lot of boards. I was trained by Chris. I was trained by John McMahon. I was trained by Mike Speiser to do the operational shit, but the reality is I’ve never sat in the seat. I’ve never been a CRO.

Chris is the only CRO in the history of technology to go from $0 to $4 billion. I think the 2 of us combined are pretty special. The reason I brought Chris in is I can’t expand the business without Chris.

We’re also making some other pretty critical hires. We’re hiring a guy by the name of Mike Hoss, who’s going to come help scale the recruiting side of the business, and then 2 other people.

To answer the question, right now it’s not scalable. Once we get these additional people in place, it is scalable. But will we ever be a company that’s got 30 companies in our portfolio? Never.

Have you had a miss in company selection, and what did you not see that you should have seen?

Yeah. I've had a bunch.

Lacework?

Yeah, I mean, where do you want to start?

Say what?

Yeah, look, I think the 2 things that I've learned the most are that if I meet with a CEO and he's not a Matan or, in my mind, a Winston type of guy, I can't work with them. Because if I go in there and say, “We need to do this, this, this, and this,” and they say, “Oh, well, geez,” I can't work with them. And I look for how often they reach out to me. The killer CEOs I work with—I swear to God, Matan is reaching out to me at 10:00 at night and 6:00 in the morning. Shriram Aswani is the same way.

So it's got to be a killer CEO and, to the extent that I'm able to figure it out—which is not always good—the product. It all comes down to product. If they don't have a world-class product, you're going to fucking lose.

Have I had some misses? Yeah, I've had a lot of misses, and it's either 1 of those 2 reasons or both at the same time. I mean, the Lacework sales team was a world-class sales team, just a crap product. That's a great example.

So, in 10 years' time, you look at each other and go, “That was a success.” What is that body of work?

I think it's making companies like Factory be the next great sales organization. I think, together, if we can walk away saying we had a hand in building world-class salespeople along with world-class product multiple times over, that's what I want to do. That's what I find joy in.

Someone asked me to be on the board of a publicly traded company, and Frank Slootman quickly helped me put that to bed. He's like, “Why would you do that?” And he's right. He's like, “Where I find joy is helping companies build.” And that's what we're doing: we're helping these companies build from sometimes nothing into these world-class organizations.

So if we can spike the football and say we've helped a bunch of companies go public, that's what I want to help them do. What would yours be, Chris?

Completely agree. If you look back 10 years from now and say, over the last 10 years, there have been 15 or 20—whatever the number is—world-class technology companies that changed the technology industry, and we can say for half of those companies we were instrumental in helping those companies get there, I can't think of anything better than that. That's exciting. I couldn't agree with you more.

A 50% hit rate on transformational companies is a—

Yeah, and I believe we can do it.

Final one, I promise. You can choose 1 VC to partner with. You can choose a person and you can choose a firm, because they might not be the same.

Yeah, I mean, look, Mike Speiser is still at Sutter Hill, and he's doing his own thing. Mike is so unique, and Mike is unique to me for a number of reasons. 1, Mike has the ability to see around corners. Mike sees shit that nobody else sees. Now, you could argue we've had some execution issues around his vision, which we've had, but Mike sees shit before anybody else sees it.

2, Mike is an operator, and he's probably the only guy I've ever worked with who is both a stock picker and an operator. And 3, Mike doesn't give a shit. He just wants to win, and he will tell you whatever he has to tell you. He never holds back.

The other guy—there are probably 2 others. I just met him: Shaun Maguire from Sequoia. Fucking hell.

I love Shaun.

I spent some time with Shaun Maguire.

This guy runs a marathon in jeans.

Yeah, every day.

No, but to the airport.

Did the taxi not work? I spent time with him. We went for a walk. It turns out we went to the same high school. We have a bunch of similarities. They're both fucking nuts.

Yeah, I spent some time with him, and I'm like, “Oh, this is my guy.”

And then, lastly, John Herring at Vi Capital. He's a big Elon guy. And the reason I love John is John is a fucking in-the-weeds VC like I am. I've never seen a guy put the hours in like he does. And I think that's true of all 3 of them. They do the work. They care. I'm going to stay silent on this one.

Oh, yeah, Chris has got an issue here.

I'm not going to stay silent on this one. Other than Mike Speiser, who I owe my career at Snowflake to, that's why I'm going to stay silent.

Guys, listen, this has been so much fun. I so appreciate you coming in person. It makes it so much better, and I can't thank you enough.

Thank you, Harry.

Cool. Thank you.