A few weeks ago, my colleague Pablo Lecea (Belatrix’s Director of Technical Consulting), and I had the pleasure of meeting with the founders and executives of some of Silicon Valley’s most valuable and high-potential software startups. The meetings were arranged as part of the Endeavor Software event, with the aim of sharing insights and best practices. Participants included Aaron Levie, the CEO and Co-Founder of Box, Mikkel Zvane, Founder and CEO of Zendesk, and Armando Mann, VP of Sales and Client Success of SalesforceIQ, as well as many others. Based on the valuable discussions, Pablo and myself have decided to publish a series of articles, as part of Belatrix’s “Software Startup Week”, where we’ll tackle some of the common issues startups face today.
Each day this week, we’ll examine the following topics:
- Does your startup really need a chief revenue officer? What are the benefits and challenges of creating such a role?
- Should you build a flat organization? Some organizations, such as Zoom, have found success in shunning traditional organizational structures, but should you?
- Can your startup afford to ignore social responsibility? With all the other priorities that startups and founders face, corporate social responsibility can easily be put to the side. We argue that it should be at the center of everything you do.
- What is the next evolution of SaaS? Many SaaS companies have grown exponentially in recent years, led by well-known companies such as Salesforce, Workday, and ServiceNow. But where will the next wave come from. We’ll argue startups should look to IoT platforms in order to catch the next wave.
- What is the best way to deal with technical debt? We’ll examine how startups can best deal with technical debt, and how they can ensure it receives a similar level of attention as new features.
To kick this week off, we’ll first look to the issue of chief revenue officers.
Does your software startup need a chief revenue officer?
As part of our meetings in Silicon Valley, we were fortunate to meet with Phil Fernandez, Co-Founder and former CEO of Marketo, one of the leading providers of marketing automation software. Phil was talking about “if I had to do it again (and I don’t want to!), what would I do differently”. In discussing revenue generation, we spoke about the different approaches startups can take, from having a senior VP in charge of customer acquisition, to a chief customer officer on top of marketing, services and sales, to a chief revenue officer (CRO) over sales and marketing. However, based on his experience, none of these approaches achieved the success he was looking for. Before I describe what did work, it’s worth taking a look at why the CRO role has emerged, particularly for SaaS companies.
The CRO is a role that has come to prominence particularly in Silicon Valley in recent years, and is now commonly found in fast-growing startups. It is a role that has emerged in tandem with the changing software industry – the shift to cloud-based business models relying on subscriptions, means there is a need to create a C-Suite which has both individuals with the strong technical skills to build the product and platform, but also those with the customer focus to build long-term recurring revenue streams.
Meanwhile, in 2017, data from the research company Forrester Research found that the top business priority for organizations was growing revenues, ahead of other priorities such as improving the experience of customers and reducing costs. This need for growth amidst a challenging and changing business environment is another key driver behind the move to hiring CROs.
In addition, we’re living in a time when customers have more information on the services they buy, and more options than ever before. Competition, particularly for SaaS products, is global. Thus there is a need for a seasoned executive to own revenue generating activities, in a way that a chief sales officer, or chief marketing officer by themselves may struggle to do. There merges a need for someone to have overall responsibility for revenue generating activities.
So coming back to my discussion with Phil Fernandez, and discussing what worked, in his opinion (and one that I believe makes a lot of sense), he recommends software startups having a CRO own the revenue stream from acquisition to growth to success and renewal. Meanwhile professional services own enablement and technical operations. Marketing reports directly to the CEO, but the funnel would be integrated between sales and marketing. This structure means you reduce the usual gap between marketing and sales, while the CRO has responsibility for the end-to-end revenue stream.
But once you have decided on your organizational structure, who makes a great CRO? What are the key characteristics you should look for when hiring someone? Well, again, Phil provided some great advice. He spoke about how the person has to be a “sales animal”, which means having the mindset of a great salesperson, and having had a quota, but at the same time needs to be a systems thinker, someone who has a global and strategic perspective that goes beyond the “glory of the deal”. To these points I would also someone that is highly data-driven. Data is the lifeblood of SaaS companies, and those that have been successful are those that are able to use their customer data to generate the insights necessary to build a repeatable and scalable sales model.
What have been your experiences with CRO? In what situations do you think the position makes most sense?