The problem stems from the fact that most seasoned sales/business guys have experience in larger companies, running established teams, which is radically different than working in a startup and having to fill every role yourself in addition to building up the team from scratch. The other problem is, quite frankly, that most of these old sales guys are at a stage in their life where working 60-80 hours a week isn't something they want to do, and so they will be very very difficult to fit into a healthy startup culture where hard work and overtime are required.
We hired a former VP sales from a big ($100M+) company in our space. A guy who was a founder at a few successful startups and had a kick ass resume in general. He was even a great salesman. 6 months later and $100k down the drain we had to fire him.
My advice is make sure that if you give this guy equity that it vests over a few years with a 1 year cliff, and that if you give him a salary that it's very modest, mostly commission based.
Odds are you're going to have to fire him, but if you want to take a chance, go for it.
Why did you have to fire him?
I would suggest that you hire an actual sales person as opposed to a sales manager. Even if they're going to manage a team in their first year, it's better to have someone who isn't afraid to go out and close deals because they will have to do so in their first year.
Most of the sales people we met at our last company had been managing sales forces for so long that they forgot how to go out and close.
Don't listen to the people who say don't bring on a sales guy. Most people haven't done it right in the past which is why they think it is a bad idea for everyone.
Find a hungry young performer who is willing to forgo a guaranteed compensation plan for a high potential compensation plan and pay them on performance. Somone with 3+ years under their belt, hopefully without kids and a high mortgage. (If they have renters subsidizing their rent: bonus points, that's a money minded sales person.) Use a ramp or draw if you have to. (Draw: is where salary now is taken out of future commissions. Ramp: it varies but maybe now they get X base salary and Z% commission and as the pipeline grows, they get a smaller base and higher commission.) I have been in sales for over 10 years and am dying to jump ship for a start up with potential but do not have the safety net at the moment.
Incentive-ize overperformance. Make their commission .75X at 0% - 75% of goal, X% at 76 - 100%, 1.25X% at 125%+. (Arbitrary numbers there, figure out what make sense for you.) You want to make them fight to make more money.
Don't think you have to bring in a seasoned VP of Sales from another company. They're like old Jaguars. Classy, expensive, impressive, high performance potentially, but you never know if they are going to start. Most of those guys are looking at you as a way to pass time between here and retirement. Maybe you can use the right one later, but not now.
First, make sure they're a startup sales guy, not just a traditional sales guy. Other comments in the thread have given enough perfectly good reasons. There's lots of individuals who want to be (and are good at) doing startup sales. I'd liken the difference between big sales guys and startup sales guys similar to coders who perform best in large companies, versus strong first technical hires. You have to be a risk taker, and willing to go with really low/no pay for a while. Traditional sales guys are often very well paid, are strict 9-5 workers, and wouldn't handle the early startup stress
Also, every job I've ever taken at a startup as a "sales guy" has been one where compensation is linked to performance. Not commission specifically, though that play a part; I mean that to get a salary, I have to deliver in regards to traffic, conversions, or any other measurable factor for the company. Basically, each week I'm called to be accountable for what I accomplished at a quantified level. I don't get paid until I hit a threshold ($15,000 in sales, x new clients based on my efforts, higher SE rank).
Do the same for your hire. Do a 4-5 month contract to see if it's going to work, make compensation based on performance, and shake hands and part ways at the end of the period if it doesn't work out -- its business.
In Four Steps to the Epiphany, Steve Blank has some great advice on hiring sales staff before product-market fit:
http://www.amazon.com/Four-Steps-Epiphany-Steven-Blank/dp/09...
Basically, he says, "Don't do it," with the possible expection of a single "sales closer" who loves working in the field, and who has been avoiding promotions to VP of Sales. As I understand it, you're not looking to build a sales organization yet, but you may need some sales skills to close your first 3 deals and prove that the model works. But even then, he has a checklist of customer discovery tasks to do first.
There's also some amusing advice from Eric Sink on hiring sales staff in a micro-ISV:
http://www.ericsink.com/bos/Closing_the_Gap_Part_1.html http://www.ericsink.com/bos/Closing_the_Gap_Part_2.html
Determine if you need marketing which is lead generation or sales which is closing
Also read spin selling, it is about consultative selling which is a good fit for hackers.
Finally count on it taking a year before you can confidently fire a non performing sales person
drop me a note if you have questions.
And, as everyone said, vesting. Might even be a good idea to make his pay commission based for the first six months - an opportunity to prove himself.
Who are your clients? Cusomters or businesses?
The million-dollar question: "Am I selling to a market that I lack access to / lack the means to access?"
If the answer is yes, then you need this guy. And bad. You're likely a lamb heading to the slaughter without someone like him. Enterprise software is one such (arcane to an outsider) market. For instance, it's incredibly hard to sell to CIOs / IT departments without a solid channel of motivated System Integrators. It's even harder for a startup with little credibility to build such a channel of System Integrators who aggressively push your product without the leverage of strong relationships (built over a non-trivial period of time, usually years or decades).
I speak from personal experience - we added a Vice President of Sales from a Fortune 500 to our team, and it was the catalyst that our business so desperately needed. Within the space of six months, we were able to close over 10 channel partners and consequently access decision makers at hundreds of IT departments.
My advice would be this: keep compensation low, as low as you possibly can. If the guy balks at this, that's a red flag. A true VP of Sales will take it as a personal affront if he doesn't have to prove his mettle through results. I can't emphasize this enough, vest equity solely on performance (revenues realized) and set a reasonable, realistic cliff (a year can sometimes be a bit too short). Give him the authority to incentivize reps adequately. There's a great example from a company called Verdiem in this TechCrunch article (http://techcrunch.com/2010/01/06/0-to-20-million-ten-hand-to...)
Verdiem’s Jim Flatley taught me this at Plumtree: he fought to get early reps 15% of every sale, but after we made our numbers for the first time ever, nobody wanted to pay them less. Even after the bubble burst and every other technology company took a blood-bath, Jim kept delivering results.
Another article that you just can't afford to overlook is by Mark Suster (http://techcrunch.com/2011/02/05/the-excuse-department-is-cl...), and he sums up succinctly in one line what I've been trying to convey through all this verbiage:
(Sales people) are more mercenaries than missionaries.
This applies to their leader, the VP of sales in equal measure and the moment you internalize this (and make peace with this fact), you'll find this decision quite easy and understand how to approach the entire exercise.
All the best!
If it is the latter, there is a work around. Sales people hold their percentages tightly and get pissed when people lower them. We own them. Don't raise and lower the one rate, add and take away others. So say if you know now you are willing to pay 15% now but think that rate will go down to 10%, introduce the 10% as the rate, but add 5% as a temporary incentive, making it an effective 15%. This way their rate doesn't go down in there eyes, it is just the extra spiff that goes away--which wasn't theirs to begin with really. They knew that 5% was temporary. However if you lower my 15% to 10%, I will always feel like that 10 should be 15.
Dumb psychology but it works.
Now if you want customers you want someone who fits your culture, is not afraid to call anyone, has contacts and is motivated by $. Most sales people don't give a flying F about stock, options, etc. They care about $. Set clear goals and have a nice commission aspect. We are about 60% salary, 40% commission and seems to be working well. Do not be afraid to fire sales people after a couple of weeks, some people just don't work even though you think they will.