Three Co-founders Bootstrapped with a Paycheck, Now at Over $50M Revenue: Ganesh Shankar, CEO and Co-Founder of Responsive (Part 7)

Sramana Mitra: All right. Well, it’s an amazingly great story, I think, and there’s a lot to learn from it. I’m really looking forward to publishing the story. So, congratulations. Great job. Really great job with execution, and I take it you’re basically operating with direct sales, right?

Ganesh Shankar: Correct. It is operating with direct sales.

One thing I didn’t cover is how important it is for startups or sales-driven organizations to celebrate early achievements. In the initial days, we understood the philosophy of a few key principles very well.

One of my mentors told me a few things that are ingrained in my brain.

The number one is time kills deals. We’ve been very fast in how we execute tasks – whether it’s product development, delivery of product, or closing deals.

The other is, compensation drives behavior. I can go into the details if you want. Now we have a different way of performance appraisal, but I’d like to talk about how we were doing it when we’re about a million dollars.

Sramana Mitra: Let me probe that. So on the deal-closing side, you have something that is actually very advantageous. For the type of business you’re in, it’s easy to prove value.

People just need to do one RFP using your product, and they can immediately figure out whether it works or not and how well it works. So that’s a very good asset to have, where you can prove value with a real POC, and you’re off and running.

Ganesh Shankar: Absolutely. Initially, even for our licensing structure, we didn’t want to anchor ourselves to a growing pain of the customers; we rather want to anchor ourselves to the revenue side. All these things are connected. Our pricing was connected to how we wanted to be part of revenue generation rather than just part of a process.

Sramana Mitra: Now talk about the compensation structure. What did you do early on to get to an accelerated structure?

Ganesh Shankar: I think I started with a mistake but was able to correct it quickly. When you bring in a sales team, you typically compensate based on the deal size they bring in. In 2016, we didn’t have a sales team. In 2017, I hired our first sales rep. That year, we needed to prove to the market that we could close deals faster.

My mentor said, “Compensation drives behavior.” What behavior did I want? Initially, I thought if my seller brings in a $10K deal, I’d give them a percentage. But that wasn’t the behavior I wanted. I wanted a high volume of paying customers, not just large deals. So, in 2017, I based the compensation on the number of unique paying customers my sellers brought in. We didn’t worry about how much they were paying. Sellers were compensated with a flat fee for each paying customer. In 2017, we quickly gained almost 200-300 customers.

In 2018, we changed the compensation plan to focus on deal sizes, as we had enough customers to support fundraising. By 2019, we incentivized longer-term contracts, not just one-year deals. Today, more than 60% of our deals are for two or three years, with the remaining 40% being annual deals.

In 2017, we integrated this approach with the product team. We have performance appraisals once or twice a year. In 2017, we set milestones: if we closed 50 deals, everyone, including interns and product managers, got a pay raise – no matter when it happened, it could even be the next day. The next milestone was 100 deals. This motivated the team, and I remember seeing countdown boards in the office. We were just motivated to get the deal in.

So that was an amazing experience to see how this propelled our team to achieve the result that we wanted in terms of logos. Then we pivoted. Today, we have a very proper performance appraisal. We can’t do that at this scale, with a team of 600 people. But when we were 50 to 100, there was a massive acceleration. We moved from 50 to 100 customers, then 100 to 250, and 250-500 customers.

Sramana Mitra: How many people in Coimbatore?

Ganesh Shankar: We’re about 300 now in India.

Sramana Mitra: Fantastic. I’m sure there are a lot more things we could cover, but I think this is a good story. I think we should stop here because we’ve covered a lot of interesting nuances that people should digest. So, congratulations again, and I look forward to following the next phase of your journey. Good luck.

Ganesh Shankar: Thank you so much. I really appreciate the opportunity.

This segment is part 7 in the series : Three Co-founders Bootstrapped with a Paycheck, Now at Over $50M Revenue: Ganesh Shankar, CEO and Co-Founder of Responsive
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