Interview w/ Ray Colletti (Zag Capital, Datadog, CodeCov, AppNexus)
Ray is my to go resource for all things dev first go-to-market
In today’s issue, I’m introducing the first expansion in Software Snack Bites product suite [I live Land & Expand in all aspects of life :) ]. This will be an interview series with software leaders on tactical areas to learn from and apply to other companies. It will be interspersed on a monthly basis in between my regular weekly posts.
My first guest is Ray Colletti, Founder of Zag Capital, former VP Revenue of Codecov, and a very early employee at Datadog who did it all from support engineering and sales to customer success and enablement. I could go on and on about Ray but will let his insights do the talking.
Can you describe for readers what joining an early stage hyper growth startup is like? We always hear stories from the outside about the overnight success but when you are first building and hiring and then hit product market fit, what does that experience feel like? How does the company culture shift?
A: The only guarantee in life is that things will change; this is magnified 10-fold in a high-growth startup. Organizational structure, management, what you focus on and where you sit all have the potential to shift in any given quarter. The two key exceptions to this type of change should be the company’s mission and values; if those are shifting quickly, it might be time to look for a new job!
As to how this feels, that might be a whole separate post! One reference point that I have sent others on this topic is “Give Away Your Legos” - quite a bit of truth here.
In regards to any culture shifting around product market fit or go-to-market fit, the core description I would use for either is that crossing that threshold is aligning and energizing. This surely does not mean “easy” though, as it might entail a shift in who is working on what or even if all team members stay at the company.
What does the company have to go through when closing first customers? Does it require a realignment in where the early employees focus? How do you make the decision that the first customer is the right one?
A: There is high variance for startups when closing first customers. Some founders are building to such specific pain points that as soon as their solution can be found on Google they have customers (e.g. dev-tools that have open source or freemium offerings). If you are a founder seeking product-market fit then your earliest customers will be design partners. In that case, closing the first customers will be similar to the vision-oriented pitch you use to convince your potential early employees.
Tactically speaking, many companies experience a shift from building product to pitching, winning, and then supporting customers. For this shift, there are three key aspects to highlight:
Set expectations - and the most important expectation is for communication! This means who will contact them and who they should contact for what purpose, when they should expect contact generally, and via what communication channel. This alignment should exist internally as well as externally; you do not want to find yourself in a position where a customer pings in a shared Slack channel and a person did not know they were responsible for monitoring that channel and responding!
Be prepared for client-driven product prioritization conversations. The key aspect of this is navigating how much of your existing product roadmap aligns with what they ask for, what you can possibly add, and what you should make clear will not be a part of the product in the near-term. It has been said a thousand times before, but it is worth reiterating that this is a great time to under promise and over deliver.
Prepare your active listening ears! Clients will ask you for quite a bit and your ability to discern which asks to “give” or prioritize depends on active listening. A client might rave about a feature request, but if it is not blocking the deal or blocking usage (or some other KPI), it likely should not get added to the product roadmap.
Now the customer has seen the demo, maybe even done a POC (proof of concept) and wants to buy. Negotiations now come into play but this is your first customer and you are an early stage startup (which the buyer knows). They’re asking for what is your price, what discount can be reached and how strict can the SLA be. What’s your advice in this scenario?
A: Funnily enough, I wrote a whole post on this exact topic - Early Enterprise Sales- Megacorp Wants a Steep Discount.
What’s the biggest mistake that you’ve experienced happening with early customers?
A: You can mess almost anything up - except expectation setting! As long as you are able to communicate frequently and accurately- even if that communication is that a deadline has to be pushed- you can preserve the customer relationship.
Do those early customers meaningfully help as the company scales to $10M ARR+? How so?
A: Yes, absolutely, in a few ways. First, those earliest customers are likely design partners who give meaningful product feedback. They also become your first customer references and ideally official case studies. It might sound routine, but securing the first few case studies is massive social proof and collateral for an early stage sales team.
It is difficult to fully describe how much you can learn from these early customers. Here is just one tactical example; if one of your earliest customers encounters a problem with deploying your software, you might decide to hire a client-facing technical employee sooner than you expected. At this early stage, that hire at that time meaningfully shifts the structure of your organization, your burn rate, and impacts other strategic choices. Another unexpected, non-product, non-revenue impact from early customers is that you might realize you need different internal tooling. For example, the decision to change from Metabase to Looker or Zendesk to Hubspot (or vice versa, etc) can go from a hypothetical choice to “must-complete-ASAP” very quickly after initial interactions with your early customers.
Between product feedback and social proof, those early customers (even if they eventually churned) are what enable you to reach $1mm ARR- and all the other revenue milestones along the way to $10mm ARR and beyond.
Did things ever get “easier” at Datadog? When the growth engine was really cranking, were you able to sit back and relax or did the challenges just shift to a different area? If so, describe that shift.
A: Some things get easier, for example once you have a few hundred employees there is likely someone with a specific job title to match the problem you are facing. It is still hard though, because as you’re still in hypergrowth, each person will have way more to do in their area of expertise than time allows.
You will also likely witness development and product changes slowing. This will initially be very frustrating to those who joined a startup to make quick changes and act relatively autonomously, but it is a good change in the long run as your product will become more stable.
I wish I could say that there are times when you sit back and relax, but that just would not be true. Even when your product is working and the growth engine is cranking, your competitors will always be keen to step in if you take your foot off the gas.
What were your biggest lessons learned from your time at both Datadog and Codecov, two hyper growth companies?
A: It’s all about the team. You have to be ready and willing to build a state of deep trust with your teammates. Everything can be hard or become an issue; what product to build, who gets paid how much, how meetings are scheduled etc. etc. If the early team trusts each other to be honest and execute on what they promise, almost anything else can be taught.
Egoless prioritization. The less upset you or anyone else on the team becomes when new information emerges that leads to a dramatic shift in focus or strategy or need, the better the chance of company survival and of an enjoyable workplace. Remember from earlier in our conversation - the only constant is change!
Play the long game. Naval said this well in a philosophical sense, but it also applies for product development. For example, Datadog today has so much incredible client-facing functionality, but if Oli and Alexis (Editors Note: CEO & CTO respectively) had not prioritized building the back-end databases and pipelines to handle ingesting massive amounts of data seamlessly, none of the other features would have mattered.
Thanks Ray! If you’d like to get in touch with Ray, feel free to reach out on LinkedIn or ask me for an intro.
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