Category Archives: Entrepreneurship

Your ICP Starts as an Aspiration and Becomes a Regression

Posted on August 30, 2025 | 3 comments

The concept of an ideal customer profile (ICP) has been around for a long time, but like its cousin, the minimum viable product (MVP), it is often misunderstood. In this post, I’ll offer some background commentary on the ICP concept and then build into one of my favorite sayings: your ICP starts out as an aspiration and becomes a regression.

There are four common questions around ICPs. Here they are, along with my answers:

  • Is the ICP about a person or a firm? Both. It should include firmographic as well as role (or persona) information. Example: VPs of sales at technology companies between $500M and $2B in revenues. Here, we included the size and industry of the company along with the target buyer’s title.
  • Should an ICP include a problem to be solved? Yes. VPs of sales have lots of different problems from recruiting to training to pipeline management to forecasting, just to name a few. Thus, your ICP should include the ideal person at the ideal company and the problem you’re looking to solve for them.
  • Should the ICP include adjacent systems? Yes. Deciding at the outset if you want to focus on customers using specific, adjacent systems is often critical (e.g., NetSuite vs. Oracle vs. Xero for core financials, Salesforce vs. HubSpot for CRM). The alternative is drowning in integration work while never having the time to support the idiosyncrasies of a given package which, when you do it, is usually adored by customers.
  • Should an ICP include sales qualification criteria? No. The ICP is about the buyer: this is the person we’re looking for. They have this job at this kind of company. Whether they’re out shopping right now, whether they have budget, whether they have a buying timeframe and purchasing authority are all important qualification questions, but they are not part of the ICP itself. People differ on this, I know [1].

Because the world is imperfect and it’s difficult to find “Mr. or Ms. Right” every time, it’s useful to think of the ICP as a bullseye. The absolute perfect customer is in ring 0, the next level off in ring 1, after that ring 2, et cetera. Note that I have no religion about the things you vary across the rings, but the usual candidates are: job title, industry, size, adjacent systems, and problem (aka use-case). And you might do them in unusual combinations. For example, if you think a director of finance with a budgeting problem is about as good as a manager of finance at a bigger company with an operational reporting problem, then you can put them both in ring 2.

The idea is to give you a simple and flexible model to agree on who to target and who to prioritize across sales, marketing, and product.

For a zero-to-one startup, you might focus exclusively on ring 0. As you grow you will typically get more use-cases, more industries, more adjacent systems, and thus more rings. That’s fine as long as you’re defining the rings clearly and triaging them into: hot pursue, pursue, and slow-roll or some similar encoding system.

With a few clearly established tiers you are now ready to report on ARR and pipeline by ICP tier to see if “you’re walking the talk” when it comes to your ICP. At many companies, you will find the majority of the ARR and pipeline [2] outside ring 2 or 3. In these cases, you simply aren’t living your ICP and instead suffering from a faux focus. The usual cause is an inability to control the sales force and prevent their default “chase anything” behavior [3].

The ICP is typically born in the founder’s head as an hypothesis. Think: I bet if we can build something like this, it will solve a problem like that. By the time a company has been founded and a product built, it becomes an aspiration. Think: I want to sell to people like this to solve a problem like that. So you sharpen your definitions of this and that, and add some additional targeting criteria like company size, industry, or adjacent systems. And then you go off and sell.

Let’s say it works. One day you look up and you’re now $50M or $100M in ARR. Congratulations. Should your ICP still be an intuition-driven aspiration? No. It should be a regression. Reality happened. Let’s find out what reality is telling us.

Are the people in our ICP ring 0 really our best customers?

Well, what do we mean by best? Do they have higher ASPs? Do they have shorter sales cycles? Do they renew at higher rates? Do they expand at higher rates (e.g., NRR)? Do we win new deals at higher rates? Do they give us higher CSAT scores?

At the first order, these are all just simple segmented metrics calculations that you can and should do. Your QBR and board decks should show these key metrics segmented by ICP tier [4]. And — since not all these metrics can be important — your e-team also needs to have the conversation about “what do we mean by best” so you can have a common, precise definition of the “best” customers that you are trying to target [5].

But the best answers to these questions are not performed using segment analysis [6]. Segment analysis is great for finding anomalies — e.g., why do we have a higher win rate in ICP tier 3 than tier 1? But it’s not a great technique for actually finding the impact of different variables on the success criteria.

For that, we need regression analysis. Regression analysis will tell us which variables most strongly correlate with the outcomes we want (e.g., that the strongest predictor of renewal is company size, not CSAT) [7]. A good regression analysis will tell you not only which factors most correlate with the outcome, but it can also be the best way to bucket those variables (e.g., the real breakpoint is at 250 employees, but your initial segment went from 0 to 500).

Odds are, when we do this kind of analysis we’ll find lots of surprises. Some of your intuition will be proven correct, but some won’t. And you’ll likely find entirely new variables (e.g., number of data scientists) that you didn’t even consider in your initial ICP exercises.

So this is why I like to say that your ICP starts as an aspiration — about who you want to sell to — and over time becomes a regression. Because one day you will have lots of data to analyze to determine who your best customers are — subject to your definition of best, of course — as opposed to who you thought they would be.

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Notes

[1] Regardless of where you land at least be aware there are two types of criteria: those that change slowly or not at all (e.g., company size, adjacent systems, industry) and those that can change overnight (e.g., out shopping, budget, authority). My analogy here is dating: you can meet the right person at the wrong time. It doesn’t change the fact that they’re the right person. (And that’s why God made nurture tracks.)

[2] Think of pipeline as a potential leading indicator of ARR. Well, it should be, at least.

[3] Using the ICP in territory and compensation plan definitions can help with that. Think: you only earn commissions on customers in ICP rings 1 through 3 within your geographic territory. That will get your sellers’ attention.

[4] Note that I’m kind of using ICP tier and ring synonomously here and that’s generally OK. However, in cases where you have lots of rings, I would then sort those rings into tiers, so ring is the more specific and tier the more general term. For me, because I like simplicity, I want to see ICP segmentation in at most 3-4 buckets, so if there are N rings underlying those, I’d prefer to hide those by using 3-4 tiers.

[5] You probably don’t want marketing targeting high LTV prospects when sales wants to target high win rate ones. We should all be on the same targeting page.

[6] One of the key problems being that the segments themselves were somewhat arbitrarily chosen. Sure, we did our best to guess who’d be our best customers. But who are they actually? We may have used not only the wrong bucket boundaries (e.g., 100 emps vs. 500 emps) but even the wrong dimensions (e.g., maybe company size is a poor predictor and industry or use-case a powerful one).

[7] I cheated here on purpose to see if you were paying attention. Thus far, we’ve largely said the ICP is about a company (firmographics) and a role/persona. But here I’ve said that company size is a better predictor or renewal than CSAT — and CSAT isn’t a ICP-style criteria. The reality is these tools can do precisely that, looking across a wide range of input variables to see which most influence the output. Obviously, for marketing targeting purposes we don’t want CSAT to be an input variable to the model, but for renewals analysis we sure would.

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Posted in Customer Success, Data Science, Entrepreneurship, Marketing, Sales, Scaling, Startups

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Five Success Principles For Startup Founders

Posted on November 24, 2024 | 1 comment

Back in October, I did a live workshop with my second cohort in the Balderton Launched program in London. I sat down intending to use the slides from my first session, but — always one to go with the flow — ended up improvising most of the session in response to the many great questions from participants.

I was so happy with the conversation that I jotted down a bunch of notes to make slides so I could post them. But alas, work got busy (including joining three boards) so I’ve not had time — until today.

So here, finally, are the slides that I wished I’d made before my October Balderton Launched workshop. Thanks for everyone who came along to the session and to Greta Anderson for setting it up. The PDF is here. I’ve embedded the slides below.

I can’t wait to use these with the next cohort!

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Posted in Entrepreneurship, Startups, VC

Design Your Organization for the Conflicts You Want to Hear About

Posted on October 12, 2024 | 2 comments

Organization design seems a popular topic these days. Maybe it’s the downturn. Maybe it’s just planning season. But either way, many people are asking me questions about how to design their organizations for 2025 and beyond. Questions like:

  • Should marketing report into sales?
  • Should engineering and product management (PM) report into a combined product org?
  • Should we unite customer success and sales?
  • Should North American and Europe report into a single head of sales?

The argument for combining teams is always about reducing span of control. This is a goal that many CEOs (and some boards) share, but one that somehow escaped one of the world’s most successful entrepreneurs, Jensen Huang, who has about 60 direct reports.

While 60 seems a bit much, I’ve frankly never understood span-of-control reduction as a top organization design goal. As CEO, you should be managing senior people so they shouldn’t take that much time. So, why not have 8 or 10 direct reports? If you can’t handle that, maybe the problem isn’t that you have too many reports, but that you’re managing them too closely. Maybe the solution isn’t to reduce their number, but to loosen the reins.

I have two rules for organization design:

  • Design for conflict. Specifically, design your organization for the conflicts you want to hear about.
  • Ensure value-add. Don’t put thing B under thing A unless the executive in charge can add value to both.

Design for Conflict

When you put, for example, engineering under product, what don’t you hear about anymore? Conflicts between PM and ENG about the time and resources required to build things. Those conflicts get silenced because the SVP of Product will suppress them, resolving them in the family.

When you put marketing under sales, what don’t you hear about anymore? Conflicts about whether sales strategy is too unfocused to enable marketing targeting. Or whether sales follows-up on new oppties in a timely manner. Those get silenced because the CRO wants to manage their own house. “Let’s resolve that at the sales QBR, not the e-staff meeting.”

When you put customer success under sales, what don’t you hear about anymore? Conflicts about whether sales is overselling to the point that customers won’t be successful and ergo won’t renew. If churn looks high, well, it must be the product. It’s not delivering, but against what expectations, set by whom? All silenced.

The rule is simple. By combining two departments, you are asking one person to resolve the conflicts between them. They’re not evil to do so; it’s the job you asked them to do. They will keep these conflicts in the family. And, as the organization grows, you will hire increasingly senior people to do just that. But with each layer and with each combination, you get more insulated from the ground truth.

So the question is simple: which conflicts do you want to hear about? Which do you want to pay someone else to resolve and which do you want brought to your office? Which are strategic to the company and potentially involve Crux-level issues?

  • If you separate PM and ENG, you’ll hear a lot about specs, resources, and timelines.
  • If you separate sales and marketing, you’ll hear a lot about awareness, leads, and follow-up.
  • If you separate customer success and sales, you’ll hear a lot about over-selling.

There’s no magical answer here. Just a framework for thinking about it. Determine the conflicts you want to hear about — presumably because you can add the most value in resolving them — and then design the organization to make sure you do.

Ensure Value-Add

The other principle is to always ensure value-add, beyond the (sometimes merely assumed) alignment that comes from having a common boss. So, sales wants the SDRs to report to them? Why? Has the sales VP managed an SDR team before? Are they good at it? Are they even interested in it? Can they add value? Are they sufficiently metrics and process-oriented, particularly if the VP comes from an enterprise background?

This principle drives a number of positive effects:

  • It defeats empire building. Sometimes the VP wants the SDR team not because they care about them, but because they want a bigger organization. Or they think it will look good on their resume for their next job search. They’re not actually interested in the job. They’re interested only in being able to say that they did it. That’s not good enough.
  • It encourages learning and development. When the VP of sales first asks about managing the SDRs, you can tell them to go make themselves a valid candidate. Get close to the SDRs now. Understand their challenges and offer to help out. Network with friends and colleagues on SDR team management. Read up on best practices. Convince me that you’d make the short list of candidates and then we can have a conversation.
  • You attract stronger department heads. Everyone should work for someone they can learn from. Saying the boss is the boss because, “well, we had to plug the team in somewhere,” is a terrible reason for an organizational structure. If you apply the value-add rule, functions will tend to report higher in the chain, creating a flatter org, and be placed only under those who can add value to them. This, in turn, attracts stronger candidates to run them. Who wants to be the CMO when it reports to a CRO who understands nothing about marketing? Nobody.

One great example is whether the VP of European Sales should report to the existing VP of Sales when you expand into Europe. If your VP of Sales is clever, they’ve already given themselves the title “VP of Worldwide Sales,” and you let them do it because it was moot at the time. But now they’ll argue it’s a demotion if Europe doesn’t report to them. And they’ll argue that they know how to sell the software in North America (really, the USA) and that knowledge should translate anywhere. And that everybody does it this way. You can almost hear them screaming: pick me, pick me!

But what they should be screaming is: I can add value, I can add value! And if they can, you should listen. But my questions would be:

  • Do you have a passport? (This wipes out about half of Americans.)
  • Have you ever lived in Europe?
  • Do you speak any European languages?
  • Have you ever sold and/or managed people in Europe?
  • Do you you have a network of people we can hire in Europe?
  • Do you have relationships with contacts at target customers in Europe?
  • Do you know any strategic partners we can work with in Europe?

So, other than not having a passport, never having been there, knowing no one, and not being able to communicate, you strike me as an outstanding candidate for the job.

We do this all the time nevertheless, and Europeans have grown accustomed to reporting into people who can’t add value. But for my nickel, I’d rather hire a VP of EMEA who had great answers to my questions and reported directly to me.

Mitigation Strategies

As your organization grows, you will invariably combine teams and lose your line of communication into certain conflicts. I know three ways to mitigate this:

  • Build a culture of transparency where direct reports into e-staffers are encouraged to and rewarded for speaking frankly about in-the-family problems.
  • Run an extended QBR. Don’t just invite the e-staff to the quarterly business review, but also invite people among their direct reports. For example, the head of customer success if it reports into the CRO, or the head of engineering if it reports into product. Ask them to deliver the same, standard presentation that the e-staffers do. This effectively flattens the organization by creating an extended leadership team that goes beyond the CEO’s direct reports.
  • Use reporting. Good reporting can reach through organizational layers and keep you in touch with what’s happening. For example, even if customer support doesn’t report to you and isn’t represented on the extended leadership team, you can still keep an eye on metrics and KPIs as well as simply on OKRs.

In this post, I’ve argued that the primary goal in organization design should not be reducing of span-of-control, but in surfacing conflicts most important to the company. I’ve also introduced a value-add rule that says no department should report into an executive who can’t add value to it. And finally, knowing that consolidation is inevitable over time as a successful company scales, I’ve offered three strategies to mitigate some of the signal loss that comes with such expansion.

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Posted in Entrepreneurship, Leadership, Management, Scaling, Startups

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How to Detect if Your Startup Has a Faux Focus

Posted on April 19, 2024 | 3 comments

I’ve realized that one of things I do for (or should I say, to) early-stage startups is detect whether they have a real or a faux focus (pronounced fo-focus) — the latter being a focus that appears to be real at first, but is in fact fake.

Focus is like baseball, hot dogs, apple pie, and Chevrolet. Needed. Timeless. And everyone’s in favor.

But, alas, when you drill in, the conversation often goes something like this:

DK: So what are you focused on?
CEO: Mid-market (MM).
DK: Do you sell anywhere else?
CEO: Yes, for sure. A lot of today’s SMB companies will be mid-market tomorrow, so we want to catch them on the way up.
CEO: Oh, and today’s MMs will be enterprises (ENT) one day, so we sell to them too — so we can learn their product requirements –and our customers can grow without fear. I mean, we’d never want a customer to outgrow our platform.
DK: OK, but what about our marketing, do we have any focus there?
CEO: Well, you know, you can’t really control who clicks on a Google ad, so we can get inbound from SMB, MM, and ENT. We can control geography though. We don’t run ads in Florin or Genovia.
DK: But those are fictional countries from princess movies. How about LinkedIn, you get a lot more control there?
CEO: We’re not doing as much on LinkedIn. Leads are more expensive.
DK: (Thinking that maybe they’re higher quality and more aligned to strategy.) How about industries?
CEO: No, we’re a horizontal play. We have customers in banking, healthcare, pharma, insurance, energy, and retail/CPG. And many others.
DK: Any focus on use-cases?
CEO: Yes. But no. No, we’re a platform play. That’s the beauty. We have an integrated platform that can support dozens of strategic use-cases. So, really, yes and no.
DK: So you’re focused on everything. All size segments, all geos, all industries, and all use-cases?
CEO: Yes. We love focus so much that we have a whole bunch of them. Go big or go home.

At this point, I’m thinking three things:

As it turns out, a quick nod to the chasm gods is a lot easier than embracing them. In the rest of this post, I’ll share some tools I use to detect real vs. faux focus and that you can use to sharpen focus in general.

  • An ideal customer customer profile (ICP) with concentric circles. Sometimes it’s too binary to have ICP and non-ICP customers, with the result that everything gets equal treatment. Instead, treat your ICP like a bulls eye. Ring zero is credit unions of size X with use-case 1. Ring one is banks of size X with use-case 1. Ring two is insurance companies of size X with use-case 1. Ring three is financial institutions of size X with use-case 2. Ring four is everyone else. I find this increases focus, especially when the inner rings are variations on a core.
  • Define the idea of strategic vs. opportunistic revenue. Look, I’ve run startups. Cash is king. You want to give me money, I’ll take it. As long as there are no strings attached. Startups get in trouble when they draw-and-quarter themselves by selling roadmap (i.e., non-existing) features to a diverse set of customers. That’s why you should define strategic revenue (e.g., in the first three ICP rings) vs. opportunistic revenue and then religiously enforce this rule: if it’s oportunistic revenue you have to sell what’s on the truck. Don’t even bother asking for roadmap commitments. Maybe give those sellers lower quotas in return. But don’t let them ruin your future by selling your scarcest resource, R&D capacity, for non-strategic purposes.
  • Segmented metrics. Let’s say you’re strong in SMB and your growth strategy is a big up-market push into MM. All of your reported metrics quickly become a variably weighted blend of two different businesses. You’ll find yourself in board meetings saying things like, “well the average sales price isn’t that meaningful because it’s a blend of SMB deals at $10K and MM deals at $40K.” For that matter, neither are average sales cycle, close rate, win rate, loss-to, and other metrics. So, segment these metrics: present SMB, MM, and total (aka, “blended”) figures. The same goes for industries and use-cases. Sometimes you’re doing great on the new strategy but the core business is collapsing faster than you thought. Sometimes, the core business is going gangbusters and you’ve made no progress on the new strategy. Without segmented metrics, you can’t easily tell.
  • Not-on-list lists. Planning is an additive process at most startups. “Let’s do this and this and this. Forget anything? OK, let’s add that, too!” To sharpen your focus, add a subtractive element. When you discuss something and decide not to do it, capture that in a not-on-list list. Think: here’s the list of things we decided to do, and here’s a list of things we considered and decided not to do. It will both help your current focus and shorten subsequent debate (think of the asked and answered objection in court).
  • Split business units. If you’re constantly arguing it’s actually two different businesses that happen to share a go-to-market (GTM) team, then consider splitting the GTM team. Back in the day at MarkLogic, we had two unlikely bedfellows as businesses: intelligence and media (aka spies and publishers). It helped that our staff literally couldn’t attend meetings in the other segment (e.g., security clearances). So we split our business in two: media and federal. We didn’t have SCs, we had media SCs. We didn’t have consultants, we had federal consultants. We didn’t have a CRO, we had a VP of media and a VP of federal. While this is a pretty extreme approach, in certain situations — particularly when the businesses are pretty far apart — it might make sense. We had two different distribution businesses atop a shared product foundation.

I hope this post has given you a few ideas on how to test your own focus, how to sharpen it, and how to report on it.

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Posted in Entrepreneurship, Metrics, SaaS, Sales, Startups, Strategy

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My Most Recent Appearance on 20VC with Harry Stebbings

Posted on February 22, 2024 | 2 comments

Just a quick post to highlight my third and most recent appearance on 20VC with the amazing Harry Stebbings (Spotify, YouTube).

It is always, always a pleasure to speak with Harry. He’s such an effective interviewer that you quickly get into detail and stories that others miss. So you end up with very rich content, which in this case lasts significantly longer than 20 minutes. (More like 72, but who’s counting?)

In this episode we hit on a wide range of topics including:

  • The metrics that matter in SaaS today
  • Why CAC Payback is flawed and CAC ratio is better
  • Why you need to hire sales reps three-at-a-time (aka, modulo 3)
  • How to forecast in 2024 and in general (keyword: triangulate)
  • The biggest mistakes made in forecasting, and how sales management practices can confound the forecasting process
  • Why renewals are harder than ever to get (but alas easier to forecast)
  • What all this means for Customer Success (both the disicpline and the department)

I’ve embedded the video of the episode below. I hope you can make time to watch or listen to it. And thanks again to Harry for having me.

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Posted in Entrepreneurship, Startups, VC

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