Tomasz Tunguz of Redpoint Ventures has a post about different type of Sales compensation plans for start ups. It got me thinking about a discussion I recently had with a very early stage company.
Interesting SaaS offering; selling into an industry that has a lot of catch up to do re: technology. We were discussing what compensation they would give to whomever they hired as their early VP Sales. Their goal was to offer no salary to the VP Sales; just a very strong commission plan. Hmmmmm.
I asked what revenue numbers they thought they needed to get to their A round of financing. Their answer was that they were not worried about revenues; just users. I get that for B2C platforms, but this was the first time I had heard of it for a B2B platform. The offering was going out at $1,000/annum per seat license. My math was that their median client would take 9 seat licenses. That’s $9,000/annum per client.
Since they stated they were not worried about revenues, I asked if the VP Sales could keep 100% revenues generated for the first clients. The answer was, “Yes.” They thought valid first year OTE for the VP Sales was $180,000, and second year was $360,000.
What they decided to offer their chosen candidate (who knew of the “zero salary” mindset) was the following: 100% commission on Gross Sales up to $90,000, then 20% commissions above $90,000 in revenues generated. So $540,000 Gross Revenues gets the VP Sales to her OTE in Year 1. $1,440,000 Gross Revenues in Year 2.
When viewed on Tomasz Tunguz chart this would be an extremely steep-sloping line that would melt the chart. I do not know if their chosen candidate took the offer and/or what the comp plan was. But I am intrigued to see which type of personality would take on that role and comp plan.