Liz Christo on this episode
Liz Christo, Partner at Stage 2 Capital, is a go-to-market expert and early-stage venture investor focused on B2B software companies at the seed to Series A stage. She brings deep operating experience through Stage 2's unique model, which pairs traditional venture capital expertise with a network of 300+ go-to-market leaders including CROs, CMOs, and heads of sales operations. Eddie Reynolds, CEO of Union Square Consulting, speaks with Christo about how companies transition from product-market fit to go-to-market fit and build scalable sales playbooks.
The core thesis is that early-stage companies must prioritize leading indicators over lagging revenue metrics to build repeatable, scalable go-to-market motions. Rather than hiring more salespeople to fix revenue shortfalls, founders should instrument their businesses with leading indicators of retention (product usage metrics) and unit economics (pipeline conversion rates, lead velocity) to diagnose and address systemic issues before throwing headcount at problems.
Christo reframes the common founder mistake of translating personal network-driven sales into a repeatable playbook. Early customers acquired through founder relationships often reflect relationship-based conversions rather than repeatable use cases, so the ICP itself may shift as you move from founder-led to team-based sales. Data-driven ICP refinement—focusing first on firmographic and technographic information that's externally identifiable, then validating through cohort analysis of product usage—is essential to finding product-market fit again as you scale.
The episode spans stage definitions (product-market fit, go-to-market fit, growth and moat), the role of revenue operations in uncovering actionable insights, alignment between sales and marketing around downstream metrics rather than MQL counts, and what Stage 2 evaluates when underwriting seed and Series A investments.
What we cover in this episode
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2:30
Stage 2 Capital's Operating Model How Stage 2 pairs traditional VC partners with 300+ go-to-market experts to support portfolio companies.
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5:00
Leading Indicators vs. Lagging Metrics Distinguishing product usage metrics and unit economics from revenue; using leading indicators to predict and prevent shortfalls.
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8:45
Go-to-Market Fit Checklist The 12-13 foundational elements (ICP, buyer journey, scripts, qualification) that enable repeatable, scalable sales execution.
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12:30
ICP Definition and Validation Starting with externally verifiable firmographic and technographic data, then validating with cohort-level product usage and retention analysis.
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15:45
The Process Builder Sales Hire The profile for a first sales leader who codifies playbooks, coaches, and enables repeatable team execution rather than solo closing.
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19:30
Sales and Marketing Alignment Aligning both functions to downstream revenue metrics and customer lifetime value instead of top-of-funnel MQL targets.
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24:15
Revenue Operations as Strategic Function RevOps as a right-hand to sales leadership, surfacing data-driven insights that inform where to double down and where to divest.
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28:00
Stage 2 Investment Thesis What Stage 2 looks for at seed and Series A: revenue thresholds as PMF proxy, customer concentration, renewals, expansion, and scalability signals.
The lines worth sharing
If your leading indicators of unit economics show you that your current team isn't going to hit the number, how does adding three more reps help?
Liz Christo · 6:30
You almost have to find product market fit again as you bring on that first sales team, even if you did find it with the founder.
Liz Christo · 14:15
No person is that good at all those things, nor do they have the time in a day to actually do those things well.
Liz Christo · 20:00
Pick an attribution model and run with it. Very few people early on should be messing around with multi-touch attribution.
Liz Christo · 22:45
Common questions from this episode
What is go-to-market fit and how is it different from product-market fit?
Go-to-market fit is the stage after product-market fit where a company has a codified, scalable, repeatable sales playbook. It's defined by 12-13 foundational elements: ICP, buyer journey, qualification questions, demos, scripts, and consistent outbound motion that any new sales rep can execute.
How should early-stage companies diagnose sales pipeline problems?
Use leading indicators: product usage metrics (retention) and unit economics (conversion rates, lead velocity, sales cycle). If you have five reps needing 50 leads/month to hit quota but only got 25, you can predict a revenue shortfall. The problem is lead shortage, not rep shortage.
What profile should I hire for my first sales leadership role?
Look for a process builder who has scaled to 10-20 people, built playbooks 1-2 times before, can codify and teach others, and iterate quickly. Avoid hiring solely on tenure or Rolodex; prioritize coachability, hunger, failure tolerance, and adaptability to early-stage dynamics.
How should early-stage founders define their Ideal Customer Profile?
Start with externally verifiable firmographic and technographic data (company size, industry, titles, tools they use). Avoid internal behaviors you can't identify from outside. Then validate and refine via cohort analysis: do customers acquired from this ICP segment stay, use the product, and renew?
What should sales and marketing be measured on?
Align both to downstream revenue and retention metrics, not top-of-funnel MQL counts. Use bottoms-up modeling: if you need X revenue, that implies Y opportunities, Z demos, and N leads. Measure trends in lead volume and conversion consistency; comp people to revenue contribution, not MQL production.
What does Stage 2 Capital look for when investing in early-stage companies?
Revenue between 500K-1.5M ARR as a PMF proxy; evidence of multiple customers renewing and expanding; no customer concentration above 80%; high growth; strong unit economics; large TAM; defensible differentiation; and founder-market fit. Repeatability is ideal but signals of repeatability suffice.
SEO meta description
Liz Christo of Stage 2 Capital on building scalable go-to-market playbooks using leading indicators and data-driven ICP validation post-product-market fit.
Target keywords
Liz Christo
Stage 2 Capital
go-to-market fit
product-market fit
early-stage sales
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leading indicators retention
unit economics
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revenue operations
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Read the complete conversation
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Read the full transcript · 53 KB · Liz Christo
EDDIE REYNOLDSWelcome to RevOps Corner, where we talk about how B2B SaaS companies scale through revenue operations by interviewing amazing guests and sharing what we see in the trenches every day here at Union Square Consulting. Today, I'm here with Liz Christo, partner at Stage 2 Capital, the go-to-market-focused venture capital fund. Liz focuses on investing and advising in serious and seed to Series A B2B software companies. Today, we're going to dive into all things go-to-market and talk about how early-stage companies build their go-to-market playbook after they've achieved product-market fit. Liz, thank you so much for joining me today. Super excited to be here. Thank
SPEAKER_03you. I'd love to start this off by just going over a little bit of background. If you could share some
EDDIE REYNOLDSmore detail on what Stage 2 Capital does, what kind of companies you invest with, and specifically what you do at Stage 2 in your day-to-day role. Yeah, absolutely. Stage 2 Capital is a venture capital
LIZ CHRISTOfund. We're investing out of our third fund. What we focus on is investing in early-stage B2B software companies. We give that seed to A range, but really, we're mandated to deploy $2 million to $5 million checks. Generally, that shakes out to be C and C plus, sometimes A. Really, how we've built the firm is half operating and go-to-market-focused experts and half more traditional finance and VC partners.
LIZ CHRISTOIf you look at our founding team, Mark Roberge was the CRO of HubSpot. Jay Poe came out of Bessemer. Really, the idea and the founding of the firm was if we bring together that best-in-class investing knowledge with the best-in-class operating and go-to-market experience, we can make better decisions and maybe more importantly, better support the portfolio post-investment. We have that equal balance. As we go to work on deals, we always have a pod with representing one of each of those two profiles working together with that prospect and eventually portfolio company. Potentially, more importantly, we've surrounded ourselves with this amazing go-to-market operating group. Our LPs, our investors, are now 300 plus CROs, CMOs, heads of sales operations, enablement. If you take a look at our website and you check out our leaders page, what you're going to find is just this unbelievable who's two of go-to-market experts. We look at that group as really like our brain trust, the group of people we can call on to ask questions and bring collectively hundreds, maybe thousands of years of experience together on behalf of our portfolio companies. Sometimes they become advisors, advisory board members, board members. There's a lot of flexibility in how we use that group, but really, they're invested in the ultimate success of our portfolio companies via our fund. Really, it all comes
LIZ CHRISTOdown to rolling out a go-to-market framework with both the collective experience of our LP base,
LIZ CHRISTOas well as the knowledge of our partners and bring that all together for our portfolio.
EDDIE REYNOLDSThat makes a lot of sense. I spent a lot of time in private equity and venture capital before getting into tech. I've always been really adamant that operating partners, both in private equity and venture capital, bringing a point of view and helping your portfolio companies really grow and scale and improve operations is critical. It's really great to see that your firm is not just doing more of that, but really so intensely focused on it. I've been a big fan of Mark Roberge for a long time as well. I think like most people in the B2B SaaS world. It's just been really interesting to see what you guys have built. One thing I'd be really curious to understand better is how do you leverage your partners? All of these different go-to-market experts that are out in the market that don't work for you full time, how do you typically leverage them to work with your portfolio companies?
LIZ CHRISTOYeah. Maybe even before I answer that, I'll think about a little bit more of how we work with the group because I think that that baseline will help you understand how we bring in others. So we have like a foundational framework that we use with all of our portfolio companies called the Science of Scaling. We're very open about it. You can go to our website and download it, but it is really a structured and thoughtful way to think about go-to-market, spanning everything from how you design your buyer journey and buyer personas to what KPIs to track, to the dashboards for your sales team, to the hiring profiles. And what we're trying to do is develop frameworks and templates for each of these items that really like come together to build a go-to-market checklist. And we help our companies actually like make sure that they have all of those pieces in place. If you think of like our role as really like overseeing that framework and helping to bring that information forward to our companies and help get it in place, then we think about how do we actually get some of the hands-on advice at particular stages of growth or particular topics or topical type consulting from that advisory group. And so our LPs can plug in in different ways. I think of it probably like most commonly like the one-offs. I'm encountering this like how-to kind of question or I want to get advice from somebody who's like been there and done that. We're pulling that group in for like 30-minute hour-long questions to try to like really tackle something in depth. And then if that goes well, I think of the next step is try to come up with something more formal. And in some cases, that's more of like an advisory board where people are giving, I don't know, one to three hours a month in exchange for some equity in the business and getting a little more hands-on. And then as I like roll that forward, there are certain people who will get involved in a way more hands-on way. And so whether that's advising or consulting, like a more time-consuming engagement. And we've had people working on companies as much as like 10 hours a week at times. And that can be, you know, helping to roll out a new functional group. It can be almost like executive for rent and somebody getting plugged in to kind of bridge a gap. Or it can be mentoring and up-leveling, you know, a first-time marketing leader, a first-time sales leader in a role where you want some of that like external experience around you. I think probably the most important thing that I like to call out as I think about that group, and I'm talking to a founder, is like you as a founder or CEO are not expected to be the most experienced or like the best mentor on each of the functional areas you run. Like you are the big strategic leader rallying and aligning the troops. But there is likely someone better than you to help get your director of marketing to the VP level or up-level and help you think about how that VP of sales could be incrementally better each day. And so we love to see that group of leaders plugged in to help play that role and actually like mentoring and advising each of the executive leaders within the company versus just the founder.
EDDIE REYNOLDSThat's great. I'd like to dive deeper into that. So specifically when you're working with a company that's achieved product market fit and they're trying to scale from there, what work do you guys
SPEAKER_23focus on normally to set the foundation for that company to get to the next stage? Yeah. I mean, there's a lot of different things, but I'll start with probably like the first thing we
LIZ CHRISTOtend to focus on is getting a speedometer in place. And I do put that in quotes because I think you need to like really like break that down into a couple of parts. Most businesses are pretty good at reporting on results and the lagging indicators of how things are going, which really comes down to like revenue. And they'll say, this was our MRR in May, in the middle of June, but it's too late to make changes at that point. And so what we try to get everyone focused on are the leading indicators. So there's two really different types that we look at. First are the leading indicators of retention. And generally that's some sort of product usage metric that indicates that the customer is going to be like deeply engaged and ingrained in the product and that they will ultimately renew and grow. But what we're trying to do is show like what happens during onboarding that makes that customer sticky and engaged. And then what needs to happen over time to ensure they're deriving value from the product. And like I said, it's usually a product usage metric. It might be something as simple as like the number of logins that happen each week. It might be more about the different modules or functionality that somebody is accessing in a product. There's a lot of different ways to look at it. The other side is the leading indicators of unit economics. And really like that comes down to, are you building a funnel that's actually aligned to how you want to grow? Are you feeding enough in at the top of the funnel and are the conversion rates consistent enough that you know what you're going to get at the output? So if you have five sales reps and you know that each of them needs to get 50 leads a month in order to hit quota, right? We can help you back into that math and show that like in order to close three customers, they need nine opportunities, which means they need 20 demos. This is like obviously all specific per business. But if you know that you need 50 leads and you're looking at April saying, wow, they each only got 25 leads. We know that there's going to be a shortfall in revenue in the future, right? You can predict that you're going to have like a down month. And we can do that by looking at the length of the sales cycle and these leading inputs. And I think one of the things that we probably caution and are like very vocal about is hiring to fill that gap. And more often than not, I think what we see around the table are people saying, okay, we've got like shortfall in
LIZ CHRISTOrevenue, go hire three more reps. But if your leading indicators of unit economics are showing you that
LIZ CHRISTOyour current team isn't going to hit the number, how does adding three more reps help? The problem you've identified is like a lead shortage, not a capacity and rep shortage. And so we're trying to unpack like the details of the how, instead of just waiting for the output to happen. And so I think I would say like that's kind of our starting point in the foundational, like, do you understand your data and what leads to success? And then within that, there's so many different things we can do to help impact the outcome, right? Whether that's helping to set up a new channel and saying, okay, we have inbound working pretty well. Can we do something to make it more efficient? Or can we set up an outbound channel? Should we be exploring partners? Um, could we be redefining what the buyer journey looks like and doing like game and game film review and actually looking at different conversations and demos? Do we want to take a look at pricing and packaging? Is there like ability to optimize that? And so I'm just throwing out random examples now, but idea being, if you like start with that framework, there's like a lot of different pieces that we can layer on from there and continue to optimize over time.
EDDIE REYNOLDSI think this is very helpful and interesting, and it very much aligns with the way that we're thinking about the way that we work with companies as well. And I think it's an age old stereotype that companies see a problem and say, how can we just throw more bodies at this problem? Um, and the biggest issue that I see, especially with account executives is that you've got three people working in specific territory and they're not necessarily finding a way to build pipeline and you're going to hire three more people. They're going to take a lot of time to onboard. You may not even have a sense as to like how much that territory, um, can really handle in terms of the number of people that can be calling on those accounts. You may have had really great success calling 500 named accounts and the next 500 are not nearly as good, but companies are oftentimes not looking at these things and then they're not looking at these conversion rates and all the things that lead from, you know, we think about metrics and in four levels, you have revenue
EDDIE REYNOLDSmetrics, like your MRR, ARR, you have your pipe, uh, sorry, your, um, your pipeline metrics, you have your pipeline generation metrics, and then you have your awareness. And I think if you break those things down bit by bit, you start to see what's working in the model and what's not working in the model. And then you realize, well, as we add another body, how is that person going to integrate into this? And oftentimes I think it's, well, we have something specific that we need to fix before we're ready for that. Yeah, I think you're totally right. And I, it sounds like they, you know,
SPEAKER_33we're kind of thinking about things in very similar ways, um, that bodies is the answer. I feel like rarely it's right. I have another question and it may be the same question. So forgive me,
EDDIE REYNOLDSbut on your website, there's a slide on the homepage describing three stages of a startup
EDDIE REYNOLDSproduct market fit, go to market fit, and then growth and moat. So specifically after product market fit, as you get into go to market fit, you have a codified and scalable go to market playbook listed. Can you tell me a little bit more about what that means? Yeah. And actually it's just like kind of the natural extension of what we're talking about.
LIZ CHRISTOSo I think it sort of tees up the next side. So one of the things we think about is in those early
LIZ CHRISTOdays, we're trying to get the leading indicators of retention and the leading indicators of unit economics to a stable place that helps us understand that we found product market fit when we can understand the inputs of the business. So if we've done that, then what we start to look at is that go to market checklist I described. And that to me, it's sort of an eyeopening thing. And it seems really
LIZ CHRISTOsimple as I described this. Um, but we basically have a list of probably, I think it's like 12 or 13 things. I should know that answer off the top of my head, but it is like, have you defined your ICP?
LIZ CHRISTOLike, can every sales rep tell me what a good lead and a good customer looks like? Can they give me examples of those customer stories? Do they understand the buyer journey? Can they qualify? Can they do a demo? Do you have a script in place? Do you have a consistent outbound motion? And each of those pieces is part of that go to market checklist. But I think you'd be shocked, or maybe you wouldn't be shocked. But if I give that to like the average founder or sales leader, they say, yeah, we have that. And then you say, okay, can you just like run through that and like check off the ones you have and like, send me the link to it. And first thing that happens is like, they realize that none of those things are in the same place or easy for someone to find. So, you know, if I put myself in the shoes of a new sales rep, like how do I get up to speed? First, I have to know where to find all that stuff. And then you uncover the holes and you think you have, you know, an outbound script. And then you open it and you're like, oh, we haven't looked at this in nine months and our messaging has shifted so dramatically. Or we think we know ICP, but really like that's been iterating over here between the founder and the head of marketing. And that information didn't make it over here to like the frontline BDR, who's actually doing outbound and calling. And so I think this really like simple model of saying like, do you have these really foundational elements that go to market that allow you to scale often come down to like communication more than anything else and helping to get everybody just really rallied around the same set of things. So sounds like a simple framework. But what we tried to do is create really like easy to use templates that bring that information together for an early stage company so that everybody has access to the the same stuff.
EDDIE REYNOLDSI mean, I find most of these things are pretty simple once you understand it. It's just that, especially in startups, there's so many different things to do that it's really easy to ignore something that's so critical, especially if it's the first time you're doing it. I think one of the things that we see so commonly as a startup evolves out of or achieves product market fit is that oftentimes they got there because the founder leveraged their 10,
EDDIE REYNOLDS20 years of experience, their personal network, and they're running around talking to friends of friends about the thing that they're so passionate about. And then they go and hire an SDR, BDR, junior AE and say, Hey, what I've been doing is working. Just go do that. And it's not replicable at all. I mean, we think about something like an ideal customer profile. Well, sometimes that that's going to be somebody that's in the founders network. And so as you scale that to building a sales team, that becomes different. And then I'd be curious on your thoughts on this. How do you layer data into this? Because I've always thought your ICP is a hypothesis, especially if it's founder-led sales. So as you scale to a sales team, is it not critical to validate that hypothesis to understand if the sales messaging delivered by SDRs and BDRs and AEs is resonating with that same ICP in the way that it did when it was founder-led sales? Yeah. There's a lot to unpack there. So keep me on task if I go too far off tangent here.
SPEAKER_39But feel free to veer off. It's a podcast.
EDDIE REYNOLDSYeah. The first thing to me in that of figuring out ICP is like,
LIZ CHRISTOwell, there's first like the definition of product market fit. And I would maybe argue,
LIZ CHRISTOI think what you're describing of bringing in those like first set of customers from the founder network is more about finding early revenue than necessarily product market fit. So I think one of the things we think about is continuing to test for product market fit over time. And like how I like to think about it more like qualitatively, and we can get to quantitative in a second. It's like, are those customers deriving similar value? Are they using the product consistently the way you expect them to use it? And I think one of the things we often see in that like network driven founder sales,
SPEAKER_11some of those early customers actually like aren't really using the software the way you were thinking
LIZ CHRISTOthey were going to use it. It's probably not record replicable. Like they actually may not be the ideal customer. It doesn't mean they're not a good customer. It just means that use case got like
LIZ CHRISTOformulated through a relationship rather than like something that you can actually go sell on a a repeatable way. So I do try to keep that in mind. Um, and then what I think one of the things I think about is I use that to extrapolate to ICP is looking for the commonalities between those early customers and who's in the pipeline. And that's, I think the first place we can start to use data. And one of the things I really try to get companies to focus on is using information to define ICP that is like publicly available or visible from the outside. And way too often the first definition I see of ICP is something like that's like, uh, I'm trying to think of like a good example, but it's generally something about how they're using the product or something that's happening internally at the company that like you actually can't identify by looking at it. And you need to figure out a proxy for that in order to tell somebody to go target those leads. So if I told a head of marketing or a BDR that I want to talk to companies who are, I don't know, spending like more than a hundred K a month on, you know, cloud, right? Like, do I know how to go figure that out externally? Or if I want to know that I need to talk to somebody who is a champion of a different system, how do I find that or build that list, right? It's easier to talk more in like terms of firmographic information and then think about what the qualification questions are afterwards. So I think of that first layer of ICP is like publicly available information. It's a size range, it's industries, it's titles. It may be like some other things that are externally validated, like, you know, what, um, what they're using to process payments because we can see that if we get to their checkout page, right? It's something that I can actually check. So firmographic and technographic data. Yeah, exactly. Um, and then from there I can
LIZ CHRISTOstart adding other qualification layers in. So that's kind of like my first layer of like data, it's a kind of soft data, right? And then I come back to that leading indicators of retention piece.
LIZ CHRISTOAnd I think for us, you know, one of the things we like to look at is how that, like how that changes over time. So we like to look at cohorts and we will say for any customer that's sold in X month, how are they performing on that leading indicator of retention over time? And are we getting better? Right. Are we actually staying within our ICP or making changes to our definition of ICP to improve that? Right. And there's a lot of different things that can go into that because we could also be changing our onboarding experience. We could be trying to close the gap in other ways, but really we're trying to figure out, are we getting better over time? And I think that helps us kind of loop back full circle. The final thing I'll say on this is I do think you almost have to find product market fit again, as you bring on that first sales team. And even if you did find it with the founder, you have to do the work to change how you pitch and the story again. And you may, to your point, have to adjust a bit the criteria of who you're talking to because it isn't just friendlies who already know you. And maybe it's not really changing like product market fit. It's more changing how you pitch the product and how you actually sell. And I think that takes a really particular profile of person. And way too often I see people focus on like, I'm going to hire someone with a ton of tenure in this industry who comes with a Rolodex. And they get really excited about that idea of like seniority and tenure, rather than thinking about the skill set that's actually required to do these early sales, which is like someone who's super hungry and coachable and can move in a lot of directions, is willing to fail really fast, can learn quickly from what they're hearing in the market, can iterate on it, can incorporate that back in, and like will be in like discovery mode, right? That looks really different than the person you're going to hire when you need your 50th sales rep, who can just like follow the playbook. So I think, you know, there's a lot of different pieces as we think about shifting from founder-led sales to that first sales leader or sales team or sales rep. But a lot of those things will help you actually like refine your ICP and make sure that you stay in product market fit phase and don't fall out of it.
EDDIE REYNOLDSWell, that's a perfect segue into my next question that I wanted to ask. In that middle stage, your go-to-market
EDDIE REYNOLDSfit, you guys have identified a sales hire as a process builder. Tell me more about that. Yeah. So I think of that person as really like who can start to think about what is scalable. So in the
LIZ CHRISTOearly days, that first sales leader is like trying to figure out who the ideal customer is to help you find product market fit. Now that we have it, we're trying to scale go-to-market. We're looking for repeatability. So the process builder is the person who can codify something and teach others and iterate on it quickly and take that feedback in. So look, that looks different in different businesses and it really depends what the size of your team is. But it is about that codification and repeatability. So I tend to look for somebody who has, you know, built a playbook once or twice before, who has been a coach, who has the capability of like teaching and helping to codify things for others. We don't need somebody who's been, you know, a leader of a 200 person sales team at this stage. We need somebody who's, you know, scaled to 10 or 20 and has like really good success in recruiting people who are successful at this stage and can get them up to speed quickly and actually like moving fast. I'd be interested to hear like what you guys see at this stage too. You work with a lot of
SPEAKER_37companies here. That's kind of how we think of it, but intrigued to see what you've seen and what's
SPEAKER_09worked on your end. Yeah, absolutely. So I think like the, the repeatability is really
EDDIE REYNOLDSkey. So I'm going to segue to my next question to answer your question. So I'm trying to think about how do I say this so we can make a nice short clip. That's going to be really great on LinkedIn over two minutes. Right. And by the way, for what it's worth, we've got some connectivity issues. So I'm like scared to ask questions you may have already answered, but hopefully our audience will bear with me here. Um, I, you mentioned on that same slide deck that as you're trying to find go-to-market fit to really focus on one channel instead of trying to like spread yourself across all different channels. And we've talked a lot about sales specifically, I think outbound sales. Um, so let's, let's focus in on that. And then I want to come back and ask you about other channels to answer your question. When we think about working with an early stage company that is trying to scale up, I think that we're big believers in just focusing on getting that one channel, right? And thinking about what is working specifically for salespeople, not necessarily for the founder that we can repeat. So when we look at the sales process, what specifically are we doing? Well, let's back up. What is that ICP? What is the buyer persona? What have we done so far to get meetings with those people? What's working? What's not. And let's really drill into that, right? So just because we booked X number of meetings, doesn't mean that those meetings were all with the right people, right? As we carry that forward. And I talked about our different levels of insights from awareness to pipeline generation, to pipeline management, to actual revenue. Um, we want to look all the way through that funnel and understand, okay, if we think this is our ICP and our buyer persona, and we get a meeting with this, this individual, what percentage of that closes, what percentage goes from stage one to stage two, to stage three, all the way, you know, to closure. And then what does that look like on the customer success side in terms of net revenue retention, which then feeds back into our ICP. So doing that ongoing analysis and redefining the ICP, we then look at how do we repeat what's working and get more meetings with more of the right people. Um, and then I think it really just comes down to understanding, you know, how long does it take to, to, to ramp a rep up? What are the things that we can do to speed that up? What are things that we can do to shorten the sales cycle? What are the things we can do to increase the close rate? How does it compare from one, from one rep to another? How does it compare from one buyer persona to another, from one type of company to another? And then I think like what you mentioned in layering in the quantitative and qualitative data is really critical as well to say, okay, what's the data that we can just run to get a list out of zoom info or clear bit or what have you so that we can create an outbound prospecting list. But as we're going through that outbound prospecting list, we go to the website. For example, this is a simple one. If a company hasn't invested in their website, how much do they want to invest in your advanced new technology that's designed for first movers, right? That's not something you can get in a list, but do you want to call somebody 12 times when it looks like they spent $500 on their website? Speaking from personal experience, I spent $500 on my website and I'm telling you, I'm not buying any $30,000 SaaS solutions this month. Don't call me. You don't want to do business with me, right? But our customers, it's different. So I think that that's the lens to look at it through. And then the more and more that you can slice and dice that, and this is why we obviously advocate for our service and being rev ops, whether it's us or hiring somebody full-time, is for that VP of sales or CRO, CEO, et cetera, to have a right-hand man or woman or team to go to and say, I want you to slice and dice this data, but don't just give me reports. Tell me the story of what's happening here. Across all of my reps, how are they getting these meetings? What's working?
EDDIE REYNOLDSWhat's not? Which of these meetings are resulting in real pipeline? Which pipeline is resulting in
EDDIE REYNOLDSclosed deals? How can we double down on what's working and divest what's not working? Yeah. I'll add, and I've definitely shared this publicly before, I am the biggest proponent of rev ops.
LIZ CHRISTOAnd I think that often we look at some of these first sales teams and we have this almost Herculean expectation of what a first sales leader is going to do. They're going to come in, they're going to figure out the sales motion. They're going to codify it and build the process for others. They're also just going to be a data wizard and be able to figure out everything you're saying. They're going to be the owner of the CRM. No one person is that good at all those things, nor do they have the time in a day to actually do those things well. And I think if you actually break down what you need in order for that first sales team to be successful in a company, it is the insights you're describing. And often I don't, and I don't mean this in a negative way. I'm not even sure that like sales leaders necessarily know what questions to ask. I think rev ops has become this really strategic input that like can come to you with, hey, you asked me for these three things, but really you should have been asking these two questions because like, look what I saw in the data. And to your point of telling the story, I think there's a lot that can be uncovered there by like looking at a lot of different different iterations and combination of things to like come back with like real insights on where to focus. Whether that, you know, that can span a lot of different things, whether that's insights on the ICP, whether that's, you know, I remember an analysis we did once of looking at like how long a deal had been in the pipeline. This is like a pretty quick sale. If something had been more, been in the pipeline for more than 60 days, it's chances of closing were like sub 5%. And so we like went back to the sales team and we're like, literally just close anything beyond 60 days, just stop chasing it, right? Like
LIZ CHRISTOfocus on building top of funnel again. And you looked at it and it was like 20 opportunities that
LIZ CHRISTOprobably would have hung around in the pipeline for another 30, 60, 90, who knows how long with somebody having to spend mind share on them. And instead they got to free that up to go back to like building something new that actually had a much better shot at closing. Those kinds of insights, I think come from RevOps, right? They're very hard to get insights like that without somebody who's actually like in the weeds of the data and understanding the business at its core.
EDDIE REYNOLDSYeah. And I don't know where those insights came from when I worked at Salesforce, but they were delivered on day one. I remember specifically being told that the most successful salespeople across the entire organization are the folks that are just mercurial and cutting their, their poor deals. Yeah. And you would just see folks that it's just very obvious. Like it gets built into your DNA that like, you have no chance of closing these deals as they continue to drag on. And I think it's just natural for a salesperson, especially in organizations that are not like Salesforce, that you just chase
EDDIE REYNOLDSeverything. Like there's this mentality of like, never accept no for an answer, which I've talked about. I think it's just like the worst advice ever for salespeople. No is a great answer. Move on. Yeah. Like the most successful salespeople don't try to like convert people's religions. They try to sell to people that have a real need and a pain and like a motivation to solve that pain. And if they talk to somebody that's not there, they cut bait and run and move on to the next, you know, prospect. And sometimes sales gets really hard, especially as you get later stage and you're negotiating over price and contracts and terms, but like, you need to have a customer that has a real need and a pain and a motivation to solve it. And if you don't have that, um, yeah, I don't, I don't know what you have. And then I think that we've come out with all these different methodologies, ban and medic and med pick and everything. And then they get overly used by salespeople that treat them like sort of a checklist. Um, and I'll tell you an aha moment I had when I was talking to a colleague, when I worked at Salesforce is they say, Hey, you know, we have these Sandler mutual plans, all these things. Right. Um, but who cares? Like, look at people's actions. Does this person respond to you when you email them? Yeah. No, you have to email them three times to get a meeting repeatedly again and again and again. Guess what? They're not committed to this deal. Yeah. It doesn't matter what they say. They're not committed to this deal. Um, whereas somebody else like you think, well, I don't know if they have budget, but they're, they're right on top of things. They're open and transparent. That's where you spend your time. Um, and I think that we, this is, I've kind of gotten off, uh, off on a, on a soapbox here, but one of the things that I would say to your point that you made a few minutes ago is that, um, the world of sales and marketing is evolving so fast that one of the biggest problems is that VP of sales or CRO that just came from a previous organization that was previously a manager, that was an AE that was a BDR 10, 15 years ago, they don't necessarily know the perfect playbook and the perfect metrics for selling in this year. And so to have somebody come to them and say, look, like in this year, in this business, right at this stage, absolutely. Uh, and you know, I think like for me, one of the, one of the hardest things about sales leadership is attracting and hiring the right people and coaching them to get better. That job alone is hard enough. So do you need to be the best at training and enablement and onboarding and building, um, uh, building out Salesforce and defining your metrics? And when I say training and enablement, I'm talking about the tech, not like how to sell. Yeah. There's just so much on that person's plate that why wouldn't you want to let them focus on what they're supposed to be good at, which is hiring great people and making them better.
SPEAKER_39I totally agree. Um, wait, and I feel like I cut you off earlier, but you're saying like, I think you're going to go with like, you want that person to be like assisted by somebody in rep
SPEAKER_37ops. Right. But I guess there's, yeah, I mean, alignment with sales and marketing we should talk about too. Yeah. I wanted to get back to that and we only have about 20 minutes left. So this is what's
EDDIE REYNOLDSreally interesting. Our entire podcast has been focused on so far on sales and specifically outbound yet. Mark Roberge came from HubSpot. I assume he's a proponent of marketing and has some pretty strong opinions on that, but here's the thing. Let's talk about that change, right? So HubSpot had this playbook and I read Mark's book and it's amazing. Um, but it's what, you know, 10 years old now, something like that. I'd be really curious, like in 2022, what you guys are thinking about the alignment between sales and marketing and specifically the metrics that you guys are looking at in your startups in terms of marketing. Yeah. So I'll say I am really focused on that,
SPEAKER_37like holistic funnel. So rather than thinking about like, what part is marketing contributing?
LIZ CHRISTOWhat part is sales contributing? What's the lead goal over here? I like this idea of like, we have five closers in order for them to hit their number. They need X opportunities, Y demos, Z leads. And if we back into that, we can start to think about what portion of the funnel we expect to come from different groups. And we should be doing that because that bottoms up modeling is actually like what allows us to ultimately hit the number and build our capacity. But then we're all
SPEAKER_39one team trying to get that done. And I, I, I laugh about this for my time at NetSuite, but we had a sales
LIZ CHRISTOkickoff one year where like each team got up and like shared their inputs into the funnel.
LIZ CHRISTOAnd I sat in the audience and I, I was running outbound at the time and, you know, I appear running marketing and appear running partnerships. And at the end of it, I looked at each other, I was like, guys, we had like actually done what we all just said we did. Like we'd be a $10 billion company, but we're not. So like, we're all double counting, right? Like we didn't all close this much in pipeline or create this much in pipeline. And so like, it's sort of at the end of the day, kind of who cares who contributed to it? We need to like hit the revenue number. And so we're trying to like get
LIZ CHRISTOeverybody aligned around later stage, uh, metrics in the funnel, rather than counting, like I produced a thousand leads this quarter, but we still need to back into it. So I don't mean to like discount those things. I just think when I see somebody like in senior level marketing, getting comped in a quarter on the number of like top of funnel leads generated, I just like, thank God that is like a recipe for disaster. So if we get everybody thinking down funnel, we can then back into the numbers we need. And then I think it's about really constant communication and can I interrupt? Yeah, of course.
EDDIE REYNOLDSYeah. I want to hear about constant communication, but I want to really harp in on this because when you talk about top of funnel, uh, marketing, you're talking about MQLs now. Yeah. Or even just like
SPEAKER_37a layer above that, which is like, these are the names we've gathered that we're going to try to do work against in the next quarter, but generally MQLs. Yeah. Yeah. So obviously this is a massive
EDDIE REYNOLDSproblem when you are hiring marketers and saying that you're going to be, um, higher to generate
EDDIE REYNOLDSMQLs. You're going to be compensated and measured on this promoted, potentially fired based on your ability to generate MQLs incentivize the incentivizes the worst behavior. And respectfully, I think some people blame HubSpot for that, right? Um, just because like 10 years ago, it was a really, really great way to distribute, um, content and white papers and things like this. Um, but obviously things have evolved a lot since then. And there is this drive among people in
EDDIE REYNOLDSrevenue operations to say, let's measure everything to revenue. And I'm just curious if you could go a little deeper on how you guys are thinking about that right now. Yeah. I mean, it's hard. I'm trying
LIZ CHRISTOto think of like the way to generalize this versus talking about any one business, but I do think the
LIZ CHRISTOlater stage we can align everybody, the better. And so, yeah, I spend a lot less time thinking about like that top line MQL number or compensating anyone on it, but I do want to measure it because of what we talked about earlier, which is we can start to identify where the shortfalls are going to be. And I think it's more about trends over time than any, like one number. So we should see that, like the top line number of leads is growing. Ideally, the conversion rate is staying consistent or improving. And then that helps us see that we have repeatability and we know that we can pour more money into the top of the funnel because we know what we're going to get out at the back end of it. But I think instead we see this focus or misalignment when people are compensated, particularly as you flagged on like the top of funnel number, not aligning to the bottom. And if what you're telling your marketer is like, you need to go from 500 leads this month or this quarter to a thousand next quarter, but you're not tying that to what the outcome needs to be or consistency, we can find a way to create a lot of really low quality, high volume top of funnel. Right. I think we all have probably like seen that in action, but there's not a lot of value to the business in that. And so, yeah, I do lean towards tying people to as far down in the funnel as we can, ideally to revenue contribution. It brings up this whole other problem of attribution, which
LIZ CHRISTOis what I started with, which like, ultimately I think it's like, I'd actually love to get your take on this, but I continue to say like, pick a model and run with it. And whether it's first touch or last
SPEAKER_39touch, very few people so early on to be like messing around with multi-touch attribution at
LIZ CHRISTOthis point, like this is about having some consistency in the numbers you compare. Um, but I'd love to hear how you're thinking about that piece.
SPEAKER_54Yeah. Um, appreciate the question. Um, so first I'll say that I don't pretend to be a marketing expert.
EDDIE REYNOLDSWhat I will say is I agree with you about the attribution models being difficult. First touch, last touch, et cetera. Nothing's perfect, right? Um, I'm a big fan of Chris Walker and refine labs and his, his playbook for this is to say, look, let's measure everything from with, in terms of, uh, qualitative metrics. Well, let's look at the quantitative side too. Sorry. I got that mixed up quantitative. Let's look at the qualitative side too. What he's saying is let's, let's put a simple, simple question on our forum. How did you hear about us? And then as we're looking back at our marketing numbers and we're trying to determine what, which of our market marketing channels are working and which are not, let's look at the attribution metrics. And let's also look at what people are putting in that form and what people are telling our sales reps so that we can
EDDIE REYNOLDSdetermine, you know, should we double down on this channel or double down on that channel? And he's especially adamant about this as we start to get into what he calls dark social, which are things like pavilion and all these slack channels, um, word of mouth, um, all of these things, even, even a lot of social media where you are not necessarily going to get a measurable click that takes somebody to your website that turns into a forum demo, et cetera. So again, I don't pretend to be a marketing expert, but I do think from like a rev ops analytics standpoint, that makes a lot of sense. And I agree with you that first and foremost, let's measure everything to revenue to the extent we can and let's make sure that incentives are aligned. Um, I did another podcast, uh, with Doug Landis at Emergence Capital, where he was talking about not just alignment, but integration and really make sure that people are rowing in the right direction so that marketing and sales and customer success all have that same North star of we're trying to attract and retain and grow happy customers that ultimately result in one unified metric, whether that be MRR, AR, ACV, what have you. Um, as we look at what's going on in the business, what are we doing that's contributing to that? And if you can't answer that question, at least anecdotally, at least with some semblance of an idea, even if you don't have perfect data, then I think that you're sort of from a rev ops perspective, missing the ball. Yeah. That makes a lot of sense. Um, now I've lost my train of thought as to what question I want to ask next. Um, let me ask you this. I want to ask you some, can I ask you some VC questions really about investing and about what the portfolio companies are, what you're looking at? First, I'm curious, we've talked so much about metrics, but as an investor, I'm not talking about when you're working with a company and trying to help them, but when you're looking at your portfolio, strictly from an investment perspective, how much are you guys actually asking for these granular
EDDIE REYNOLDSmetrics company by company? Oh, all of them. Yeah. So that we're, we're doing this work on the way in.
LIZ CHRISTOUm, and look, it's not that they all have them. I want to be really clear on that, but we're asking
LIZ CHRISTOthe question and trying to understand what the gaps are. And then I think there's a couple of ways to look at it. It tells you a lot, um, just at a coachability level to see how people react to the questions and whether they buy into the model. And for us, like these are pieces of the puzzle that like we really value in building a company and that we know we're going to want to be able to access over time. And so with what we're hearing back from a founding team is like, we don't care about that data. Like we're probably not going to be a great partner to you. Like you are going to find us really annoying. Um, but then the next layer of that is like, what are we getting back? Are we getting, um, a level of detail that we are like, oh man, these people are like, so in the weeds, understanding their data. Like we're really excited to dig in with them. Are we getting a version that's
LIZ CHRISTOlike, Hey, we haven't been tracking this, but we just made like a really concerted effort to get the
LIZ CHRISTOfirst cut and like, we're excited to work on it with you and get feedback. Are we getting like a data dump that we got to go like sort through and figure out those are none of those things in and of themselves are necessarily deal killers. It's just understanding like the lay of the land and where we're starting. And then, you know, kind of the posturing around it and the learnings about the people are more important. Um, within the actual data itself, I think there are some things that are easier to underwrite or take a bet on than others, um, particularly in a really early stage business. So, you know, if we have a mid market type sale or SMB sales, like more transactional, high volume, and we're starting to see some repeatability in that go to market. Awesome. It's just the founder selling and like, you know, there's not a ton of metrics there yet. That's okay. We're trying to just know the lay of the land. If we're instead looking at like something more self-serve that's like PLG and bottoms up, we care a lot more about like the usage metrics and how people are moving through like a freemium model and converting and actually engaging with the product than we necessarily do about like the revenue on performance, the revenue on the back end at this stage. So, you know, there's not like one set of metrics for all, but we definitely are digging really deep in this data and trying to understand as much as we can, both about the actual performance of the business as well as like these more like funnel oriented and leading indicator type metrics we're talking about now. Yeah. Knowing what I know about stage two, I can't say I'm surprised to hear that. And it's great to
EDDIE REYNOLDShear. How about outside of the metrics? I'd be really curious, you know, for an update, you know, the market's changed a lot, um, especially over the last number of years, not to mention just the last few months. Yeah. When you guys are looking at seed series, a series B, what are your typical expectations of a company? What is a typical company look like that you would want to invest in at a seed stage versus series a series B and what I'm asking about specifically the milestones that they
EDDIE REYNOLDSneed to achieve? Yeah. Um, I do think it's different depending on the go to market motion.
LIZ CHRISTOSo I'll just make that call out again, like a product led business that is showing like unbelievable,
LIZ CHRISTOlike inbound engagement and like top of funnel attraction with high user engagement and freemium maybe hasn't fully monetized yet is very different than somebody selling like enterprise top down. So ignoring that for a second, we just got to like, know that those are like fundamentally different things. We're looking generally for some sort of revenue threshold. And you know, it's funny. I actually had a really good conversation with the founder the other day, because I told him we generally invest when a company is between 500K and 1.5 million in ARR. And like, that is just like a really big range that doesn't really mean much.
LIZ CHRISTOAnd he said to me, he goes, why? Like, what does that mean to you? And I said, well, to me, that's like a proxy for product market fit. And what we're really looking for is, do you have like
LIZ CHRISTOa broad distribution of customers or is 80% of your revenue concentrated in one customer? Have we gone through a renewal cycle? And do we know how those customers perform? And are we seeing expansion within those customers? Right? So like, yeah, we want to know that customers are actually renewing that they're using the product and engaging with the well and that they're growing. And so revenue is sort of like this baseline threshold to help us understand if it's like worth digging in to see that. But yeah, could I see that in a 300K business? Absolutely. Could we see that in a later
LIZ CHRISTOstage business? Sure. But we're probably not going to pay a valuation that someone's excited about. So
LIZ CHRISTOwe have to create these sort of like artificial lines to help direct us. Then within that, there's
LIZ CHRISTOgrowth, which is like the next obvious one. And I think, look, there are different profiles of companies that different investors look at. We tend to look at like high growth companies, particularly given the stage at which we're investing. And then there's, you know, the standard stuff around financials and, you know, unit economics and gross margin. And, you know, some of these things are much, like I said, kind of easier to deviate from than others. I think gross margin is a really good example of that. Yeah. We want gross margins to be really high in a software business. But in a really early
LIZ CHRISTOseed stage business, like hiring an extra marketer or like having too much storage ahead of your customer sales could like really dramatically change that month over month. And so it's more
LIZ CHRISTOthinking about the story and how they impact those and taking them in aggregate. There's not like, we need it to be this number. Does that make sense? So you look, it does, of course. So just to
EDDIE REYNOLDSrecap, you're looking for a company that first and foremost has achieved a certain level of revenue because it's a proxy for other things. And specifically you want to see revenue growth, but even more importantly, you want product market fit where they have a number of different customers using the product, using it well and renewing so that you see that there's this repeatability. And what I was hoping to see from you, and maybe it's just because we've talked about it so much, is that you want to see that there is a scalable, repeatable, predictable model to get from step one to step two, step three, so that there's a logical progression and say, well, you've got 10 customers using this product and renewing it. And there are 10,000 other people like them or companies like
EDDIE REYNOLDSthem. And you have this particular motion to attract them. And if we hire more people and improve the operations, you can get more of those customers and serve more of those customers and make more money and have more revenue and do it at a high growth rate with high margins such that we as an investor can get an exit and we can return money to our investors. And I will say we're willing to take more risk on the go to market side, given who we are and who our
LIZ CHRISTOinvestors are. So like, yeah, repeatability would be awesome, but signs that it could be repeatable or like that we're seeing like the similar use by customers. And we know that we can help create like true repeatability, like that's works for us. And then the things we're not talking about are like,
LIZ CHRISTOobviously, like we care probably more than ever about a large market. We want to understand the
LIZ CHRISTOcompetitive differentiation and moat that they've built. We want to know that the founder and team are aligned to this market. And there is a reason that like they are set to win here. So those are the things that I feel like are like sort of like we bet first. And if we get through those, we're doing more of like the number side that you like you and I are talking about now, but that top line stuff is still super important and probably arguably even more in this current market.
EDDIE REYNOLDSYeah, of course. I mean, you guys do risky investing. You need a big exit to make it pay off. Yeah, but that's really helpful context. I think we're about at time. So I want to wrap here and thank you so much for spending time with me on this podcast. Thanks. I think it was great.
