Anthony: For the past 10
years, you have focused your career as a sales & marketing
executive on young private companies. Why did you choose
that segment?
Gary: My focus on young
companies is based primarily on my very early business
experiences back in Russia where I started the first
television advertising company and helped set up the first
Internet email systems. Everything was new back then as
communism was breaking down and businesses were just
beginning to be created. We had to develop everything from
scratch and I became used to having the ability to make
decisions rapidly and the satisfaction of seeing the
results.
After being in Russia for three years, I joined Harris
Corporation as their Corporate Representative for the Soviet
Union, still based out of Moscow. This was an incredible
learning experience, because now I was part of a $4B company
in an exciting corporate role. However, I came to the
realization that I needed to be in an environment where I
could react and shift gears very fast. So I decided to
return to the US and join a software start-up in Pleasanton,
CA. And here I was again, right back where I started, with
the ability to make decisions quickly and react to customer
needs. And I think that’s really why start-ups are more
successful than large corporations at bringing new
technology into the field – they see a need and can react
within the market window.
Could I ever go back to a big company? I think they’d
have a really hard time with me – I’m probably not
sufficiently political (grin). It’s also the risk reward
aspect. As a salesperson, I’m a risk taker. My job is pretty
basic. If I don’t make my numbers I get fired. When, as a
salesperson, you realize that that’s just the way it works,
you get very used to saying, “I’ll roll the dice here based
on a set of elements I see.” And that’s what you do in small
companies. You see an opportunity and you decide whether or
not to roll the dice.
Anthony: Start-ups face many
challenges including unproven products, unknown brands, and
tight budgets to name a few. How do you overcome those
challenges to compete with well-established companies?
Gary: The key for any new
technology company, or any company in general, is that you
have to solve a customer problem. Or you have to uncover a
problem that customers don’t even know they have, convince
them they have it, and sell them the solution. Ultimately,
it’s about selling a solution.
From a start-up perspective, in order to be successful
and face those challenges, you have to have a better
solution, or you have to have convinced your customer that
your solution is better. And it has to be so much better—or
so much cheaper, or so much faster—that they’re willing to
take the risk of working with you, a start-up. So what I try
to do from a marketing and product definition standpoint is
to:
a) validate that the problem exists, and
b) get the customer involved in the solution.
Ideally, you get the customer to tell you what his key
requirements are. Most customers are more than happy to tell
you if you’re willing to listen. And then you weigh those
requirements against that of many other customers and build
a product that may meet 70% or 80% of everyone’s
requirements, while meeting 99% of the requirements of the
customer you really want to get. And that target customer is
going to be someone willing to take the risks, and willing
to pay you for the solution.
Many times, we’ve built the product with a single
customer in mind. And it’s really risky, but risk is
inherent to start-ups and venture capital. Start-ups have to
fail fast. Nobody likes to hear the word fail. But if this
isn’t going to work in a year, or whatever reasonable time
frame you’ve decided to attach to it, then you should stop
spending any more time or money on it and move on. This is
why focusing on a single customer, while very risky, can
often be the best way to determine whether or not you can
stay in existence, if you can solve their problem and get
them to pay for it, then you probably can do it for others.
Something else I learned early on is to never, ever allow
your engineering team to build their dream product. Just
build a product that’s good enough. You don’t need the
perfect product because by the time you develop it, the
niche or market opportunity is gone. I’ve been in too many
situations where people say, “But it’s not tested.” And I
say, “You know what? We have the next week. That’s it.
That’s our window of opportunity. A week.” Why? Because the
customer is off balance. He is in a moment of change. If I
don’t get in there and show it, I’ll miss the opportunity.
So I’ll take the risk that I can talk myself out of a demo
failure or some other surprise before I miss that
opportunity. Showing up late with the perfect solution means
you get to hear, “If only you’d been here last week before I
signed…”
Finally, I want to own the vocabulary my customer uses to
describe the problem I’m trying to solve for him. In one of
my earlier start-ups, we were building a product that
basically enabled telephone companies to exchange
transactional data. There was no vocabulary around this
exchange of transactional data. So we created a bunch of
words to describe our solution and used them in all of our
marketing efforts. We taught our customers that that’s what
these things were called. And it became the standard. So all
of a sudden, when our competitors wanted to compete with us,
they had to use our vocabulary. This is not easy to do and
requires a lot of public speaking and customer interaction.
And that’s where, in the early period of a start-up,
everyone on the team is a salesperson regardless of their
title.
Anthony: How do you plan and
manage your sales cycle?
Gary: In the A round stage,
the sales cycle is more of a solution cycle. You, as a
company, have to define it, build it, and get it to your
first customer. It’s a big sales cycle, and it’s critical to
have very good execution. Unfortunately, most small
companies fail in this area because founders tend to be
really good at defining problems, but not as good with
execution. What you end up with is a great idea that dies on
the vine because of poor execution either in sales or
engineering.
Later on, as the company develops, the sales cycle
becomes much more standardized and easily managed. One of
the first things you have to come to grips with in the sales
cycle is not the how, but the how long. You have to set the
right expectations for your team and your investors. So my
tactic in the sales cycle management is to basically run it
like a project. Many people feel that salespeople don’t like
to be managed. My belief is that salespeople generally don’t
like documentation. But most good salespeople have an innate
understanding of what the process will be. As a sales
manager, I must document it, get the sales team to document
it and then manage the process. And the document doesn’t
have to be complicated.
I have something that I’ve put together from various
sales strategies that I call a PPP report (Progress,
Problems and Plan). It’s the only written report I require
from my sales people, which provides a forecast update for
each PO. The PPP is updated by my salespeople on a weekly
basis and is in essence a stop light report : its
purpose is to tell me how to move the ball down the court
for a particular opportunity.
- The Progress section is as simple as: “I met
with Joe Smith and we discussed whether the requirements
that we gave him were correct.” Now what are the next
steps? Only items where actual progress was made are
reported here.
- The Problem section of the PPP is: what do you
need as a salesperson from the rest of team? What do you
need from me as your sales manager to do? Is this
opportunity going south and why? This section of the PPP
is the absolute most important one as it describes the
action items related to issues in the field - ignore this
part at your own peril.
- The Plan section is: What are you going to do?
It’s a 2-3 months lookout that’s described at a high
level: customers to visit, trade shows, etc…
The PPP becomes the stop light report in that if it’s in
the progress section, it’s generally in green. If it’s in
the problem section, it’s either yellow or red. And that’s
how I manage the sales cycle. When you have a small number
of opportunities, you can be proactive and detail-oriented
because you have the ability to know everything. But after
you reach, like on my current forecast, over 2,600 distinct
opportunities, it becomes impossible to know everything
about every single one of them. The forecast is very
important, but it’s a huge amount of overhead for me because
I personally maintain it and update it. However, the PPPs
tell me in short order where I have to focus my time and
that of the rest of team. The PPPs are critical because they
tell me where I am and point to where I’m going. I tend to
be interrupt driven. This is why I focus on the problem
section, which distills for me, from a salesperson’s
perspective, what I need to focus on.
Anthony: Do you do cold
calling?
Gary: Cold calling is an
interesting thing for salespeople. You tend to find people
who are incredibly good at it - most people aren’t. There is
a guy I’ve worked with over the years, who I hire in at
early stages because he is the best cold caller that I’ve
ever met. He can do 20 calls a day and get 15 meetings out
of those 20 calls. I don’t know how he does it and how he
stays focused for that long. But he does. Other people just
aren’t good at cold calling. They really need that
relationship base. So to answer your question, do I do cold
calling today? I will when I see an opportunity that I feel
is easy to justify. It’s the low hanging fruit principle.
Calling somebody out of the blue where you don’t see any
real opportunity is in my opinion a waste of time because
there’s always easier fish to fry. But when I see somebody
make a statement in the press acknowledging a problem or
issue I have a solution for, I’m on the phone in a
heartbeat. Because now there is a personal connection and a
hook I can leverage.
Anthony: How do you turn a
rejection into a positive outcome?
Gary: One of the best ways
I’ve found for turning a rejection into a Yes is to repeat
the rejection back to the customer. If the customer says to
me “I don’t like your product because it is too expensive,”
I’ll reply, “Really, you don’t like my product because it’s
too expensive. Well in comparison to what?” In other words,
get them talking about the rejection. This creates a
foundation under which you can continue to have a
conversation. It would be a mistake to reply to the customer
rejection by saying, “But the product has all these great
features,” because the customer doesn’t have a problem with
the features. He has a problem with the price. People
generally tell you what they want to talk about. So talk
about it. And even if you don’t succeed, never hang up
unless you have been able to establish the ability to call
them back. One of the best techniques I’ve used again and
again is to say, “Can you help me understand why it’s too
expensive? Is it because of this, or is it because of that?
Let me go back, research and find out if I’m too expensive
in those areas in comparison. And I’d like the opportunity
to get back in touch with you.” Unless you’re dealing with
an incredibly hardened individual, most people will let you
come back if you tell them that you’re going to address the
issue they raised.
You also need to know when to cut bait. I’ve seen many
salespeople who keep coming back for more. Yes it’s
admirable, but it’s a waste of time. Going after the hard
one, unless it’s really strategic, doesn’t make sense early
on. As a start-up you have limited resources, so you need to
go after the low hanging fruit because you need early
success, and you need to build on it. Once you have
credibility and success, penetrating the more difficult
opportunities is often easier.
Anthony: Do you believe in
PR in the early stages?
Gary: I’m a true believer in
stealth. One of the things you have the advantage of as a
small company is that nobody knows you. And because of that,
nobody is defending against your pitch, your angle or
anything else. That’s why I’m not a big fan of press
releases. However, I must add that one shouldn’t send out a
press release unless everything has been signed, sealed and
delivered. When I see my competitors’ press releases, I call
up their customers and ask them if the deal is done. More
often than not, the deal is not done. The easiest way to
derail these deals is to make absurd or really low offers to
the customer. Even if it doesn’t get me the job, it disrupts
the competition by creating uncertainty and doubt in the
customer’s mind before I have a product. The whole idea is
that if they capture the customer, I can’t.
Anthony: If you are a
US-based company, should you pursue international markets
first?
Gary: Having worked all over
Europe, Asia, and Latin America and spent 10 years
internationally, I can say that unless you can practically
guarantee that you are going to get the business with almost
little or no effort, I think that going international is a
terrible idea for a start-up. The reason is that everyone
underestimates the amount of time, travel, and investment
required, as well as the complexity of operating in a
foreign language environment. There are many examples that
contradict this. And I give those folks a lot of credit, but
I think that when you look at those companies that were
successful internationally first, 90% of them basically had
a very strong connection to a problem or an opportunity that
was already well defined in the country they were selling
into. You see this a lot in China and Asia where one of the
founders has a strong connection in that country.
Anthony: What is your
approach to building and motivating your team?
Gary: I’ll describe my
approach in 5 points:
- Don’t hire salespeople until you are 3-6 months away
from having a product. Before that time, salespeople will
be frustrated and disruptive to the company. Why? Because
they get paid to sell, and so they will sell whatever they
can think up to get paid. During that early phase, it’s
better to hire business development professionals who can
focus initially on product marketing and evangelical
selling, and later move them into either sales or
marketing.
- In the early stages, I tend to have marketing and
sales report to the same person—me. Why? Because outside
of product definition, where you hire experienced
technical people, marketing is basically building the
pitch and the sales strategy and to do that you have to be
selling to the customer and getting the feedback. As the
company grows, the two functions must be split. I always
try to bring in my replacement on the marketing side well
in advance. Generally, I like to promote from within
because I am able to leverage the employee’s existing
company and product knowledge, and send a tremendously
positive message to the team by elevating someone to my
peer level.
- In a start-up, focus on buying the relationships. Get
salespeople with a big Rolodex even if they don’t have
100% understanding of your market or product. It’s easier
to train salespeople or support them with Sales Engineers,
than to develop the relationship base. I strive to hire
people on my team that are better technically and have
better relationships in the region than I do. They may not
be as good in managing, forecasting or other things, but I
hope that they’re better at selling than I am.
- Use the interview process to select and hire
successful salespeople. If they can’t sell themselves
during the interview, why would they be able to sell the
company’s product? Listen and watch how they sell you on
themselves. You’ll generally see them use the same
approach with your product. Also, I’ll often say something
somewhat personal in the interview along the lines of: “I
don’t think you’re qualified for this job.” Their answer
will help me assess how they react when being confronted
on a personal basis because this often happens on sales
calls. There are many salespeople out there who take
rejection very personally. I don’t know how they became
salespeople, as it hurts too much to take it personally.
One important characteristic in salespeople is that they
are confident enough in themselves that they generally
don’t care about what people think of them because that
would drive them out of the business.
- Salespeople are motivated by money. I don’t waste time
with salespeople that are motivated by loyalty and other
esoteric things. I hire greedy people for sales and I
motivate them by paying them well and giving them an
opportunity to make a huge upside. So put together a sales
incentive plan that allows them to make really great money
based on the achievement of objective goals – bookings and
shipments. And most importantly, once you establish a
sales comp plan, never ever under any circumstances change
it to reduce the incentive until it runs through the sales
period you designated it for. I’ve seen this happen in so
many start-ups, it’s not even funny. Management gets upset
because they set a sales target, a sale quota and a
payment scheme and some salesperson blows it away. So what
do they do? They change it so he doesn’t get what was
originally agreed upon. Don’t get greedy. A successful
salesperson is a great example for other salespeople who
want to be just like him! When you change the plan in mid
stream, all you’ve done is shot yourself in the foot.
Because now, all your salespeople are wary that management
will make changes at will. They lose faith in getting
compensated and start looking for another job.
Anthony: Accurately
forecasting revenues and bookings is tough to do for young
companies with little history, and few prospects who can
swing results significantly in either direction. How do you
generally tackle this problem?
Gary: Forecasting in the early
stages of a company is kind of a misnomer because you don’t
have enough data to do a reasonable forecast. In the
beginning, I spend a lot of time on the funnel that
identifies the sales opportunities. Most of the products
that I’ve dealt with over the years have been 1M+ per sale.
So having a weighted forecast, where you basically take a
percentage and multiply by total dollars, is a waste of time
until the funnel is in the $20 to $30 M range. Of course, it
would be different if there were many opportunities with a
small dollar amount, as the law of large numbers works in
your favor. So early on, I just basically list all the
opportunities for what they’re really worth and start moving
them around in time while being really honest with myself.
The weight is 1 if the probability of closing the sale is
above 80%. Otherwise the weight is 0. I think it is
important that salespeople list out all the opportunities
and that these opportunities be communicated to board
members during the early sales period. After all, this is
what’s going to make the company live or die. You can tell a
lot from the size and composition of the funnel in the early
days.
When you reach the point when you can use a weighted
forecast methodology, I think it’s very critical to use a
double weight forecast approach. I ask my salespeople to use
two weights. The first one is a Reality probability,
which quantifies the odds that the customer is going to give
a purchase order to anybody (not just us) in the market.
It’s basically a probability of qualification. The second
weight is the probability that we’ll win the deal. I call it
a Win probability. So if it’s a 100% Reality
probability and a 50% Win probability, that’s great. That’s
a 50% probability and a salesperson should be spending time
on this deal. But I can’t tell you how many times I’ve seen
people focusing on a 20% Reality and a 75% Win. And I ask
the question, “Why are you wasting any time on this deal?”
And I hear, “Oh well, if he finds the money, ……. .” If you
think he’s going to find the money, your reality percentage
should be higher. You see many salespeople chasing after
these types of deals because their friends are there, but
there’s no money to be made.
Anthony: Can you talk about
your experience in VC fundraising?
Gary: I played a very
important role as a VP of sales in VC fundraising. The most
successful situations were when we presented as a team. As a
VC, I can’t imagine being pitched only by the CEO because
the CEO isn’t performing all the functions in the company.
If the salesperson fails to present well, what makes you
think he’s going to be any better in front of the customer?
The same goes for the marketing person. So it really comes
down to the concept of investing in teams. I can certainly
say that I enjoyed this process. To me it’s just another
sale. You’re still selling the same thing: the product, the
people, and the company. It needs to be managed differently
with a different set of requirements, but it’s just another
sale.
Anthony: You have
interesting hobbies such as kitesurfing, Russian literature
and scale R/C model aircraft. How have they helped you close
deals?
Gary: A lot of people talk
about golf. I surf, and that’s probably my biggest passion.
Being here in California, it’s not so hard. I was in Monroe,
Louisiana visiting a customer. And I really didn’t know this
particular individual very well. I was expecting to talk
about fishing and hunting and those things that I am
familiar with but am not too fond of. When I walked into his
office, I saw on the wall the framed picture of a guy
surfing and it wasn’t this particular individual. So I
asked: “This is a great picture. Who is it?” “Oh, it’s my
nephew,” he said. It turned out his nephew was a world-class
surfer. The client was extremely proud of his nephew. He
also happened to be incredibly impressed that I knew
anything about surfing. So we developed a great relationship
based on the fact that I was able to make a connection with
his nephew.
I also rowed crew at the university. You’d be amazed how
many people I’ve met at higher levels of companies who have
rowed crew. I think the reason is that it’s an amateur sport
with no professional future. You basically have to be a
lunatic to want to do it because you have to get up at 5:30
in the morning and row in the cold with ice on the water.
You tend to be very focused and driven. And I think those
are some of the things that help you succeed later on. Once
people know that you rowed, they have a whole new respect
for you because you’ve shared that common experience.
Anthony: What advice do you
have for early stage start-up entrepreneurs when it comes to
selling their first product/service?
Gary: Everybody is a
salesperson. I think that’s the key. The CEO and everyone on
the team have to be the best salespeople because it’s a team
effort at the very beginning, not just to the VCs, but to
sell the product. Also, see the customers early and see them
often. Get them involved in the definition and development
of your products. And keep it as simple as you can in the
beginning. Finally, I said this earlier and I’ll say it
again: it just has to be good enough to demo, and to get
into production. It does not have to be perfect. So be
honest with your customer and set yourself up to be given a
lot of slack.
Bio
Gary Testa, Vice President of Worldwide Sales - Aurora
Networks
Gary is responsible for all aspects of
Aurora's
sales operations and strategy and has grown Aurora’s
revenues well over 500% in 18 months. Prior to joining
Aurora, Gary was SVP, Worldwide Sales and Marketing for
Gluon Networks, which developed one of the first CLASS 5
soft-switches and raised over $75mln in venture funding
during the telecom drought of 1999-2002. As SVP Worldwide
Sales and Business Development for Quintessent
Communications Testa built Quintessent's sales revenues and
established Quintessent as the leading supplier of
Interconnection Gateway software building revenues from $0
to over $23mln in two years. Previously Testa has held
senior director level sales positions with Harris
Corporation and Sprint in Europe and the Soviet Union,
managing the sales of Class 5 switching equipment, optical
and wireless transmission, GSM equipment to the Soviet oil
and gas industry. Testa has lived and worked abroad for over
12 years in Russia, Germany, Finland, and other countries
around the globe. Gary is an avid surfer, kitesurfer,
snowboarder, and OC-1 paddler and is the proud father of
three children with a loving and very understanding wife.
