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Why is the Average GTM CXO Tenure So Short in B2B SaaS?

Posted January 18, 2024

Dan Frawley, Managing Director of Falmouth Ventures, joins our host, Camela Thompson, Go-To-Market Thought Leader and B2B Insights Expert, in this episode of the Revenue Marketing Report. He shares his thoughts about why all go-to-market executives are at risk of losing their jobs during hard times and why it’s so important not to take things personally.

Today, we’re going to be tackling a tough one in the last of this series and it’s about why there isn’t really longevity in the C-Suite in the go-to market B2B SaaS team.

“As the companies go, so do sales. So obviously there’s that effect that’s going on right now. 200,000 people in the tech business have been let go in 2023. That’s just through the year to date today. On the other side of it I see companies are killing it, growing, and scaling, continuing. So what’s the difference between them? Again it gets back to something we’ve talked about in the past. This product market fit thing is so important, particularly, for a salesperson or a marketer. Forget the CEO and the founder. As a salesperson and marketer entering a company. I’d really want to make sure I understood that the company had product-market fit, and how effective it was and how unique it was. What evidence was there to suggest that they did have it? Because those that didn’t have it, most companies have failed. They will continue to fail. And most of those are around product-market fit. I went through one myself, a company called Techies.com. It was basically a LinkedIn job board for techies. We had 2.5 million techies. We grew the company to 600 people from 20 in two years. Classic dot com, raised almost $50 million and had a bunch of some of the most talented West Coast VCs on the board. Ironically it was a Minnesota company, my second one. So I now had experience. I thought I knew what I was doing. Had an exit to the first one. We’re going to take it public in October of 1999. Someone offered us, I won’t mention who, a nice price, but it was only a quarter of the valuation of the public offering and so we said, no. It was a $250,000,000 offer. We said no because we had a billion valuation. I pushed to have it sold since I had gone through hell for seven years on the last one and had a nice exit. 

“It was a four or five banger, but it was far less than that 250. And the reality is the board didn’t agree. We ended up moving forward and went public in March. The market crashed right when we’re going on the roadshow, never got out. And then I had to let go of almost 300 people and to your question, many of those salespeople and marketing people were phenomenal. However, the demand for technology people dried up and product-market fit was no longer. The market was no longer growing. Therefore, it isn’t just product market fit. How is the market doing? That’s the second piece of it. In this case the market went from phenomenal to atrocious overnight. That’s not the salesperson or the marketing person‘s fault. It’s just the reality of it.”

You can’t really blame the board, I wouldn’t even say for being greedy. They didn’t know what was coming. You had great instincts and I see where they were coming from. Unfortunately, we have context and hindsight’s 20/20.

“Why would you sell this for a quarter of what it’s worth? The banker who was representing us was a top-notch investment banker. Why would you do that? And I’m 35 year-old at the time. That’s a good question. All I can tell you is I don’t know how it gets any better than it is right now. It turns out that was the hockey player in me. Remember I said you go to where the puck is going to be. That turned out to be right, but they weren’t wrong either. That’s what makes these things so hard. They weren’t wrong either. I saluted like a good military guy. Ultimately, we had to turn it over to a restructuring company and the whole investment was lost. Very difficult one for everybody. Those sales and marketing people were producing tremendous results and everything was lining up.

“You want to be carried that you’ve got the micro. How is the sales and marketing team optimizing the result within the current macro picture which is product-market fit and market health for that particular product. As I said right now with our portfolio, I see some companies that haven’t missed a beat. They have phenomenal product-market fit, big markets and this economy has not changed the appetite for those. Others I see that it has. 

“And therein lies the challenge for marketers to try and discern the difference. Why is our open rate not so high? Our social; media campaigns were generating X and are now generating half X”

“Those are all important things. It’s critical to be quantitative and have your benchmarks and your framework down so you can see like a fighter pilot does. When my altimeter tells me I’m going to hit the ground, I pay attention. It tells me my air speed is suggesting I may have lost one of my engines. I pay attention. You need to pay attention to it, and it’s the same for marketers and salespeople. If something has changed, you have to ask the question, why? And, how do we fix it if it’s possible?

“Some marketers might be wondering why I’m not just focused on the CMO because it’s easy to look at stats like 80% of CEOs don’t trust or are unimpressed by their CMO. There's some other research that’s come out of the Wall Street Journal recently. However, if you pull back and look around the CMO is about 18 months, VP of sales is and the CRO is about 16 months average tenure.

The VP of Customer Success in SaaS specifically is around 12 months, which floored me because I would have thought that CS would probably be the more stable of the three, but that's not proven out in the data. So to me, it's kind of obvious the wind blows where it blows, and that impacts marketing and sales. Do you have any insight on why CS would be so impacted? Or is that just weird to you too?

“In the pecking order, sometimes I think they typically get shot first, when you’re in a difficult expense environment. One of things that I tell young CEOs in this environment is don’t just go out and try to finance your way out of it. When the economy shifts, in some cases, we’ve had a good company with good products, the market has shifted. You’ve got to batten down the hatches. My third company, I told you about the one that blew up. The first one that I stumbled into with a relatively youthful inexperience but managed to pull it off. The first one I learned a lot. The third one, now I’ve been doing this for a long time. Get a board to grow the company very carefully, brought in some great investors. We just went from zip to $18 million in five years. It was in ‘07 or ‘08 and guess what happened then? The economy, right?  So yes, there was some shift in marketing. I tried to balance where the puck was going, but also pay attention to my instruments, and did a preventative cut. So back to the question, how did I prioritize those cuts? Generally, in that environment, the best salespeople are always going to be hard to let go because that’s the end of some revenue, same with your marketing people. CS people you can think, well, maybe I can load up more. I can up the workload and they can hopefully hang on for another six months or year until we get through this. You’ve got to cut all the essential costs when you go through these things. In that case, we did and the worst never came. We did pull back. We went from t $18 million to $15 million. Fortunately, we were so aggressive on cost-cutting, we were still slightly cash flow positive. That was at the expense of some good people, who the whiteboard said cut and my heart broke when we did. That’s just the reality of the system. In ‘09, we started growing again. And then in 2010, the Corporate Executive Board came along and bought the company. So great, we survived. That’s what I tell CEOs today, which is you’ve got to look at several options. Cut everything that you possibly can if you’re in that situation where your sales number is starting to wobble because of a market shift, because survival is so important. Live to fight another day, so to speak, as well as continue to look for financing, which is very difficult to do.

“That’s why I say Series A is the right one to be at this time. If you’re looking for B or C with nice growth and valuation, it’s such a hard thing to get right now. Very tricky for the middle of road companies. The top 15-20%, they’re always getting funded and getting bought. They’re screaming and their market doesn’t happen to get hurt. There’s always a small segment of those out there. And then the bottom end is the ones that fail. I’m talking about that big group in the middle that’s doing pretty well, but they’re not killing it and they’re not dying. And that’s a sizable group. That’s the one that often has a lot of struggle. As I said in the beginning, 75% of venture investment companies typically don’t return capital and of that 75% half of them go under. So it’s a very difficult business.

I wonder about another aspect of CS leadership. So one of the last recessions, I remember looking at the marketing data and I felt like Chicken Little. Something's happening because the conversion rates aren't happening. But it took six months for that to actually impact new sales bookings. What we saw first was NRR being impacted because when there's a recession, people start rethinking their budget. One of the first things they start studying is how much are we spending on tech. Do you think that could also be part of the factor there?

“Budgets are complicated and nice to have vs. must have is a really big deal. That kind of gives you a barometer of how good of a job you did articulating those two. Good to have versus a must-have. Remember, with tech companies, there’s this scaling. And if you think about it on a relative basis, doubling is relatively small, when you’re really small. So there are these tremendous changes that happen as you go from startup to bigger to bigger. As a former CEO, this is a mistake I see a lot of companies make. You can sometimes lead. So you go from sales to sales lead. And then the requirement is as you grow, you need a leader.

“And a lot of times the people that were phenomenal at sales and then sales lead, they didn’t have the experience yet and they weren’t ready to lead. You put them in there because they were good at selling and then they fail in leading. I see that happen a lot. And by the way, that can happen in CS as well, in reverse. So let’s play it out. The CEO has to cut costs. He doesn’t want to cut his sales. He may take out a leader and he may say, my top CS person can sell CS/lead, can lead. And that allows me to take out my lead I can no longer afford. I could afford them six months ago, but I can’t afford them now. So that thing happens in reverse. So sales lead or service lead, and then lead.

“You can go lead, service lead and take out the lead. You follow me. That’s the way sometimes that happens. It’s not the fault of the individual, it’s about the business situation.

And if there’s anything positive that has come from all the layoffs, I hate to spin it as a positive, but I’m a marketer, so I have to look for something, is that the layoffs have kind of taken a lot of the stigma out of looking for a job. I think we can acknowledge that with how many there have been, there are some really talented people. It’s not just cutting the fat anymore.

Oh, no question. My LinkedIn network is more active inbound than I have seen in a number of years.. And I know because I work with these people. They used to make fun of me because I like working with people that I know. They go, oh, does that mean you’re biased? I said, yeah, I am. I’m biased towards people because I knew that they could do the job. That’s what I’m talking about. Not them personally, but I knew they could do the job. And why take the risk with somebody you don’t know? Because the reality is hiring people you have never worked with before, I always joke, is 50% the success rate. With people that you have worked with before it is closer to 100%.

And those are the odds I like. And right now, my LinkedIn network is lit up with some of the most talented marketing and salespeople I’ve seen because of what we talked about earlier, which is 200,000 taken out in the tech industry. That had nothing to do, in most cases with them. It had to do with the marketing. 

“Yeah, don’t take it personal. Look through the noise. These things always turn around. I already actually see it, and I see little glimpses of light here in terms of the tech sector specifically. And by the way, every single sector was down when I say the venture industry was down. If you look across, some were slightly better than others, but almost every sector was down, from ecommerce to Agtech, et cetera. So hold your head up. Brighter days coming again. Call the people that you know that you know.”

For more content on B2B marketing trends, listen to the full Revenue Marketing Report episode at the top of the article or anywhere you podcast.