Perfecting a Bottoms Up & Top Down Sales Motion w/ Chris Merritt (Founding CRO, Cloudflare)
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If you have a raging problem and you have a solution that just solves it, almost like a magnetic pull, an electromagnetic pull between problem and solution, the budget will be identified. What if I told you that we're going to build a sales team that doesn't talk about price, that doesn't talk about packaging?

that doesn't even do discovery or qualification on budget or authority on the first call. You'd think I was crazy. What if I told you we're going to build a sales team that's going to be a peer to our very technical buyer? Their first and only objective is to answer their questions.

Well, that's what Chris Merritt did. The first sales hire, the first sales leader at one of the fastest growing companies in B2B software, Cloudflare. He actually looked at the company's blog as inspiration on the type of salespeople he would hire and the type of sales culture he will build. We're going to unpack that riddle on this episode. My name is Mark Roberge, and this is a Science of Scaling.

So hey, Chris, welcome to the show. Hey, Mark, thanks for having me. It's good to see you. No, it's a pleasure to have you. So really excited to unpack one of the fastest growing stories. When we talked, I joked with you that we actually teach a case at Harvard Business School called Running Hot. It's about Cloudflare.

I think it might be infamous. Yeah, you're probably one of the reasons they were running hot. All right, so tell us about the first, whatever it was, 30, 60, 90 days. You obviously had to get in there. You had to figure things out. How did you tackle that? What were your findings? How did you figure out the order of operation? I spent time with the engineers, spent time with customers, and...

I put it into a narrative and a framework that the company understood. Think about incidents, P0, P1, P2s. So I put the whole process of working with customers in a framework of what's the process flow and then where are our

P zeros, P ones, P twos and P threes. And it was really clear. If you look at P zero sub zero was capacity. We just had so many customers that were interested in working with us and interested in learning more about us, but we did not have capacity to engage with them. Sort of clarify, Chris, like the P zero was not necessarily like bits and bytes flowing through, um, you know,

It was literally people to handle the inbound flow. You had anywhere from the hobbyist person that put their, you know, their personal blog or their picture sharing group from this kid's soccer team.

in some form of a web application or a website calling and saying, I have X problem. So you have these really simple questions and the phone's ringing with simple questions all the way through to, I am a very large publisher. I have tens of millions of users and I have XYZ network problem. Does it work?

And you had to engage across the spectrum of those that were individuals all the way through to the most discerning IT and network buyers in the world. And I had to figure out a process flow to deal with the entire mass of that. What's the go-to-market team look like when you join? Zero. There was. We're talking about all product and engineering at that point. P0 was get capacity. So we started hiring engineers.

that could work with customers. So it's literally like people coming with these questions and like you said, they're of all varied types, you know, hobbyists all the way to like Fortune 500 companies and you're just hiring engineers that have people skills and can answer the questions. The way I think about the job is find customers, help them adopt the service, ensure there's some success in using the service and then create a fair value exchange where you can

earn the right for the business that you have today and then earn the right to do more over time. I think that one of the smartest things the founders did, and I'll give them credit for this, they thought of us all as customer development. Nobody was salesperson or account executive or solutions engineer. It was just customer development. And it gave you a lot of license to engage customers where they were

They didn't think that they were talking to somebody that was a gate before you got to a technical resource. And those mechanics are get on the phone, solve a problem. If they're calling you, they're looking for help. And the best way to start a relationship is to become friends by helping them. Hey folks, just Mark here. Yeah, culture, customer development. Never call your salespeople salespeople. For whether right or wrong,

Unfortunately, the function has evolved to mean something not so great, especially to buyers. And so in a startup, call your salespeople what you want them to do. And in this case, it was customer development. They wanted them to get on the phone with all these technical folks who were having issues and help them use the product. Name them accordingly.

All right, let's get back to Chris. That was the baseline expectation. Now behind the scenes, you start to create a production system where, you know, not different like Henry Ford, like you start to do role delineation and you start to have people that are more first call versus super technical second or third level support. But the team is a team, right?

And anybody that picks up the phone needs to be able to solve the problem without handing it off. It worked like a gem. And then we did that whenever we'd open another office overseas, we would do that, go back to team goals. Biggest question I get every day, how do you build the next unicorn?

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That's really cool. And I do think there's probably a lot of first-time product founders and technical founders that are salivating right now. They're just like, yes, this is exactly, this is what I wanted. I want to hire my engineering buddies who are pretty good at talking to people and forget about those standard magic mind trick salespeople. And then on the other hand, and I'm curious why...

You don't think this happened because we've both seen environments where the product or technical founder tried it and then there were a lot of really cool technical conversations happening on the phone, but there was no sales. The way I think about it is if you have the technical user that is reaching out with a problem that they're asking you to help solve, if you can solve it for them, they don't think they're getting it for free. There are some free riders, but in general, they want you to exist.

So the whole value exchange and getting to, you have to pay for this. We didn't hide that. We just didn't put it as a blocker to trying to solve their problem. And so we earned the right to that fair value exchange. And I think that if you had to have a, I can't buy, my boss needs to get involved. Like that's a spend threshold. Are we talking about

$10, $100, $1,000, $10,000. How much are we talking about that the person on the phone that you're working with that is the practitioner? I think about PLG, practitioner-led growth. The person with fingers on a keyboard, what's their authority to spend? Network engineers, security engineers, at least when we were doing this, they had the ability to spend thousands of dollars a month. I used to say you could magic a $50,000 spend.

Just because they needed it and solved the problem, they could do it. We tried to keep the size of the initial engagement within that envelope. We were very intentional about that. Hey folks, just Mark here. Yeah, this is an important point that a lot of folks fall into a little bit of a trap on in not distinguishing between top-down versus bottom-up. Bottom-up wasn't actually ever an option.

for the most part, before the internet, before freemium, before PLG. And now it's become a very attractive motion. But to become a billion dollar business, you actually have to exploit both. That's what happens a lot when you get to your first 10 million, your 50 million, 100 million, you're doing this bottoms up motion where you're selling this end user. And then it doesn't work when you go top down.

And a lot of it's because of a lack of appreciation for a concept that many people refer to as the decision-making unit or DMU. And that's what I'm showing you here. And when you get to these bigger deals, they typically touch different departments. There's multiple constituents that can get you to a decision.

And Chris admitted himself, like this first deal is single threaded. What we mean by that, it's one person evaluating. They look at it. I have a problem. I need to solve it right now. I have the budget. Here's my credit card. Let's go. I talked to one person. That doesn't happen top down. And so you really have to understand the different roles within the decision-making unit.

And this is just a simple framework we teach at Harvard Business School around thinking this through. It's an e-book called The Strategic Selling Primer. I think it does a good job framing it. So they use these five roles. Often when you're pursuing a top-down sale, as Chris is talking about, you can take individuals and put them to each one of these roles. So the economic buyer, the first one is an example. That's the person that signs the contract.

It's the person that ultimately says yes or no. They give you the money. It's usually the CFO. And they're very ROI driven, right? They don't care if it's easy to use. They just care like, when am I getting my money back? And how much like ROI do we generate from this over time? Now compare and contrast that to the end user. They don't care about the ROI. They care about like, is this easy to use? What's the support line? Do I get to go home to my kids earlier or not?

And compare that to the technical buyer who's like, how do you set this up? How do I maintain it? Is it going to like cause issues in my environment? Does it integrate with the rest of my environment? And then you've got the concept of a champion and coach. And this is like a really important concept. The champion is the person that's on your side and advocating for you. Usually they're like the business unit head or something like that. And in great enterprise selling,

when you talk to great enterprise salespeople, they'll tell you, the reason I get a deal is not because I had the best price, not even sometimes I had the best product, but it's because I developed the best champion and going out and finding the right champion to get that deal done. Because honestly, the way that sale is going to happen is the CEO or CFO, whoever it is, she's going to be sitting there saying, okay, we got to pick a vendor

And your champion is sitting here making a case for you and your competitor's champion is sitting there making a case for them. Whoever's better, whoever's more powerful, whoever conveys that case better behind closed doors without you there isn't going to get that deal.

So that's one of the big differences between top down and bottom up, like Chris is saying, is just the appreciation of a decision-making unit and the ability to fit each individual in a role and tell the message according to what they care about. All right, let's get back to Chris. So if you're asking me, where do founders sort of get this wrong? I think they get it wrong on the, you start with an individual practitioner, right?

If you try to skip them and go straight to CXO buyer and you don't have them as champions or you don't really have the proof points internally, then you've got this slow moving tops down sales cycle where you're like every other organization. You don't have any bottoms up.

So I see when you try to skip over that middle is where the system chokes. I think it's when you skip steps is where the whole thing gets complicated and people get confused. Like, wait a second, why is it not working? It worked with this practitioner. Why is it not working with the CXO of large financial services? Like what happened? It should work across the entire spectrum. I'm having trouble thinking of another PLG product or funnel.

Because most of them focus on the end user. That's where most PLGs, they start on end user value. But a lot of times they have actually zero budget. When you think about the end user of Notion, the end user of Slack, a lot of times they're like, no budget. And what you're dealing with here is if we just retract back to a very simple qualifying matrix like BANT, budget, authority, need, timing.

I can't think of a better situation than CloudFlares. You're dealing with an end user who has almost a six-digit budget, the authority to pull the trigger on that right now, and in some cases, huge urgency because their website's down. Is there another analog you can think of in PLG that's as good? If you have a raging problem,

And you have a solution that just solves it. Almost like a magnetic pull, an electromagnetic pull between problem and solution. The budget will be identified. And if you take something, largely, it's been well written about. Like the...

Denial of service attacks. They were front page of the New York Times, of the Wall Street Journal, of the Financial Times. And it's just a wonderful example of like why the technical team at Cloudflare is so darn good is they made really smart upfront technical problems that ultimately made solving problems easy and the efficacy was immediate.

Whereas, you know, legacy solutions just didn't work. So if your question is how to ensure that you are going to have a lot of suction between your problem and budgets, I think it's between like how big a problem and how fast do you solve it? In which case the budgets will flow. Yeah, really cool framing of the context. So let's continue on to that top down. So

You know, we can go in a couple of different directions because I'm also curious, like, why did it break at 10 and how we deal with that? But I think just to continue on this whole concept of like, it seemed like at some point you did want to sell million dollar deals. And so talk about that. Because right now you've outlined in the early adopter situation, how you got big five digit deals pretty quickly. Single threaded in a way. Yeah. It sounded like.

Can you educate the founders and the early sellers here? Now we want to close million dollar deals from these large companies. What had to be different? My experience with working with practitioners that have a problem, see a problem, solve a problem with your product and do have access to budget. There's a certain spend where you start. And the question is, is that where you end or do you start to do more? And Cloudflare had a wonderful and still does to this day.

wonderful and very lauded for all the right reasons, flywheel of new product. So we were on this really high product velocity. And as you did that, you would expand the footprint and the spend, but you had time to do it. Typically, the thing that they came to you with either, you do not have a lot of time. You have to either solve the problem or they're going to move on. And then you have this much more rational expansion motion where you're like, oh, I'm

you started here. Did you know that we'd also do X, Y, and Z? Create more value than you capture. Certainly for the first sale. Leave a little bit of money on the table. You're going to get another bite at the apple because we have more product to talk about. So your land at four figures or five figures is

you know, naturally expands to six figures, you know, low six digits. And then you're just on this journey of earning the right to do more. So we, we were very versed in the how to talk about budgets and what we're going to do together over time. So that in years two, three, four, and five, we had a plan. And at a certain point on the value side, you, you do have to have the ability to talk about budgets and ROI and take cost takeout and

And it's like you don't get to pass go without having the conversation with the IT person or the end person or the network person or the security person, very senior level person had to endorse you. And they would look to their champions to see if it worked. And I would say our team over the course of the sort of

Tens of thousands to hundreds of thousands to millions of dollars, like the kind of person that we brought on board and grew our team around had to be able to handle those conversations. But they were like really technical and all started with having a great relationship and great support and champions and the practitioners. So Chris, you were able to avoid a common pothole somehow because usually what happens is folks bring these salespeople in.

And they're paid like salespeople. It's like, hey, you have a million dollar quota. Go close a million dollars. And so you put them in these PLG funnels like you're explaining to us. And some infrastructure director comes on like, yeah, I've got this problem. And it's an $80,000 fix. But the sales engineers, the salesperson sit there and be like, I can pull $300,000 off this.

If I can just say, hey, listen, I can get you that, but you should also buy this, this, and this because that's how they're comped. Because most salespeople are comped on the first revenue from a customer. And so this whole, I love your vision around create the value first and then you can upsell into it. But we've had this really bad combination of legacy comp plans with this new age funnel. How did you all avoid that? This is a starting point.

And people have long memories on how your relationship started. And I've talked about this a lot. If job one is to solve problems, if you get excited, that energizes you and you do that well, the process of creating value and then being fairly compensated for that, that will come. Hey folks, just Mark here.

This is a wonderful opportunity in the type of sales motion that Chris is talking about. Like we've woken up over the last 20 years to realize that our North Star, especially in B2B software, is not primarily top line revenue growth, but it's driven by customer retention. That's the key number and net dollar retention. And unfortunately,

While our new age go-to-market motions that Chris is outlining here, where you can start with a land, really quick, great value creation. And then when the annual contract comes up, you've got more to sell them because they're like, wow, when I buy stuff from Cloudflare, I get huge ROI. So let me go buy more. Unfortunately, the legacy sales compensation plans that we still use today contradict with that beautiful motion.

Because forever, salespeople have been compensated most for the first revenue from a customer. And so what happens is now in this Cloudflare situation, someone comes in with a dire need that would normally cost like $10,000, $20,000, $30,000 to solve. But the salesperson gets comped on the first revenue from the account. So they want to sell them everything, the half million dollar deal.

And that slows things down. It lowers the close rates. And what it does is it messes up this value equation that Chris has because the person can't adopt it all from the beginning. And so there's this gap over there paying for 10 times more than what they're actually realizing in terms of value. That makes for a very bad renewal versus if you rethink that.

And I've done it in various companies where I went against the norm on that and told the salespeople, I'm going to pay you 20% more for the expansion revenue. That aligns things. And the salespeople sit around like, oh my gosh, you know, I know how to work this comp plan. I'm going to, when I get this particular account, I'm going to sell them just the small amount that they need and then wait a quarter or two quarters and then sell them the rest. Hand clap.

Beautiful. That's exactly what I want. That allows us to create value in line with what they're paying. It allows us to create a lot of happiness amongst that customer account. And it gives us room to expand once they've gotten to know us into more product, which helps our net dollar retention.

So just be very careful because there are a lot of situations of B2B software companies trying to match a great modern go-to-market motion with an old school legacy compensation plan. And it creates mayhem. All right, let's get back to Chris. Not to duck your question. If you go back to, hey, if it's an $80,000 deal and they're trying to jam you for $300,000, there's a little bit of a trick, which is it's going to take a while to get a $300,000 deal.

You can get $80,000 deal pretty quick. So we, I was always an advocate across most of the teams I've worked, try to do quarterly quota setting for as long as you can. It gives you the ability to be wrong as a leader. Hey, I didn't get the right number this quarter, but I get another bite at the apple and resetting it next quarter. Hey folks, just Mark here. I hope it's clear what Chris was saying here. This is an important point.

I don't know why in the first two years, three years of startups, we obsess over these annual plans. We are unnecessarily copying big company behavior. Like big companies have to sit down in October and they have to figure out what their plan is for the next year because it involves hiring sometimes thousands of people and moving systems. And it can take like 15 months to get it all set up. But we're flying F-15 fighters as a startup.

And so I don't understand why we set these annual plans that have huge uncertainty and then we miss Q1. And what do we do? We say we got to catch up because that's what the annual plan says. We got to hire more salespeople. But the reason we missed is because it's broken. The last thing you want to do is feed more fire and more burn to a broken model.

So it's like, okay, we did our best. We tried to hit Q1. We missed by 20%. The last thing we want to say is we have to find a way to make up for that 20%. Why? Just reset the number for the quarter according to what we have capacity for and try to restart and build a healthy business. That's what Chris is saying here is we don't know what we have in the business here. So go out and try to make your quarter and then take a step back, reassess and think about what you can do in the upcoming quarter.

All right, let's get back to him. It keeps the sales cycle short. And in the beginning, when you're trying to figure out what the right price points are and what the right motions are in the packaging, you need fast sales cycles because you need feedback quick. If it's just a bunch of annual deals that you're chasing and they all come in at the end of the quarter, that may be the same numeric number, but it's not the same learning that the organization went through. So I think about this...

fast deal cycles as a way to get learning velocity, but also it keeps the leash on overselling in the beginning. But candidly, like fast forward, when you're at enterprise deals, you have to unlearn that a little bit because it is more tops down based when you're into production through committees and they're doing much, much bigger sales

commitments to both sides are making big commitments to you and you make big commitments to the customer. You need to have the ability to sort of rethink what the right starting point is. It's not always an $80,000 start if you're working with large enterprises because they just, they either don't take that serious or that doesn't fit their rhythm. They're looking for a three to five year relationship out of the go. There's one more question I'd never asked on the podcast before. And it's like, you're a great person to speak to it.

And that is when a solution engineer should be used. And I've seen so many entrepreneurs and sales leaders who come from an environment, a bigger environment, let's say, where solution engineering was needed. And then they kind of jammed it into an environment where it wasn't. How do you know when you should introduce a solution engineer in your go-to-market system? In effect, you start with solutions engineers because you have this problem-solving orientation system.

So I would, I think about the problem a little bit differently, which is if you're working with technical users, like practitioners, they will have an expectation that, and they should have an expectation that you can handle their level of technical inquiry. I think that the, the, or the cred that you get by an early technical engagement, that's really high quality. That to me suggests solutions engineers early, right?

And oh, by the way, solutions engineers early. That's another way to think about it is like founders early, right? Founders engaging with customers are like the ultimate solutions engineer. If you haven't started with solutions engineers somewhere in your mix, I would say you're probably under, you're under optimized and you may not have the right tone in the marketplace. You might be playing a little bit of like,

put the smart people behind the sales process and don't let them talk to customers until they're qualified. I don't subscribe to that. I think how do you bring other people into the mix without diluting the experience that a high solutions engineering game engagement has? That I think is the challenge. I rage, rage, rage against

Not having solutions engineers in there in the beginning and then rage, rage, rage against the mix of solutions engineers going down too fast. Yeah, that's actually intriguing. And what a gem for the ecosystem, Chris.

Congratulations on navigating it. And thank you so much for dropping the knowledge with us today. I know I had a good time. So thanks for having me. Thank you. I really appreciate the kind words. All right. That does it for today, folks. Our episode was written and produced by my favorite producer, Matthew Brown.

Editing comes from Patrick Edwards. The science of scaling is a proud part of HubSpot Media. And if you like what you heard today, make sure you follow or subscribe to us wherever you're a fan of the show. And if you're a founder ready to scale, check out my VC firm, Stage 2 Capital. We are backed by over 800 CROs, CMOs, CCOs from the best companies in tech and we're ready to help with your scaling journey. Okay, see you on the next episode.