How have we done? Where are we going? Why are we here?
The 20 minute VC podcast is worth listening to.
SaaStr wants to be the largest community for SaaS Founders, Execs, etc.
Inside Story Behind a 5B IPO
Atlassian took all the 10 year employees to New York to celebrate the IPO, and having been on that journey Jay feels like that they’re just scratching the surface. Even though they’ve traditionally targeted developers and then IT teams, the amplification of the brand will expand in to other teams in organizations. Operating as a public company has introduced discipline in to the company and has increased the opportunity to build a company that outlasts the founders.
The IPO is not the destination, it’s just a milestone along the way to building a large company. Secondary funding has provided not only some liquidity but also advice and guidance along with hiring networks. The $60m round gave the company some branding writhing the global market place and gave a deeply experienced institutional firm to the board which set the stage for the public markets.
Pick a market that’s huge and build a product that allows teams to get started in minutes. This is where many horizontal businesses come unstuck where S&M costs are double R&D costs, which is an inverted model from the more common sense approach.
When considering sales strategy, everything comes from an understanding of your market and customer. One of the seminal moments in Atlassian’s history was the diversion in to multiple products, Jay says they’d be a vastly different company if they didn’t pursue Confluence in the mid 2000’s. Cross product selling and expansion is prolific in their customer base. Atlassian’s partners have had such a critical impact on their growth and success over the years.
When you’re think about strategic product we think about it like a snowball rolling down the hill. More investment in a snowball increases its size and therefore momentum. Multiple ways of selling various products is also a set of challenges in its own right and there are still options where behind the firewall is still a viable option for customers.
New Relic: Scaling even faster the second time
The secret to the success of New Relic was the lessons learned from the first time around. Whatever you can do in your product to improve the first usage. The summer of 07 and the iPhone first came out and what stunned Lew was that the investment in R&D in the first minute of the usage of the phone. That was the most important minute. In your enterprise software, what is the unboxing experience like in your software?
Picking the right size of your original target market and using partners to improve expansion was key to New Relic’s early success. Freemium pricing played a key role in conjunction with a high priced product by giving further exposure in the developer community, even though there was no sales staff. So they commenced an inside sales force at the start of 2009.
The goal was to provide a product that sold well in to smaller companies but scaled to large Fortune 500 organizations. The sales function was essential in driving usage up in to those larger companies. It’s always a business that we’ve had under control.
Lew still feels that there’s nothing he’d rather be doing. Never regret a Monday of having to go to work. Deliver amazing products to customers.
Series A was $3m, Series B was $6m and these were deliberately small which brings focus to the business. There are times when you can use capital to manufacture growth, rather than using smart thinking to solve business problems. For instance, part of the model that had built negative churn in to the product.
When considering multiple products at New Relic, the customer journey is the central decision so that product is being built to anticipate future demand that is currently not being requested or even foreseen. R&D is broken in Horizons 1–3 where 1 is the products that are well embedded and paying the bills and 3 is that which is driving a market agenda where competitors haven’t anticipated the market going to.
Hiring that Great (First) VP of Sales
The first thing to do is get 2 reps onboard that is proving a repeatable experience. Have them excited about the vision and the product and working hard on process and procedure. You can’t hire the VP of Sales until this is well worn in. A VP of Sales is required once you have a proven, repeatable process.
It takes 6+ months to ensure this repeatable process is well proven and a VP of Sales can be an accretive hire. These discussions though could be being had over the life of the company, a bit like VC relationships. The general idea is around the 2 sales reps and ~$1m of ARR.
Once that hire has been made, the first role of the VPS is optimizing the existing sales team for maximum output. The whole next 6 months typically is recruitment and refining strategy and tactics. Diversity in reps is probably an advantage rather than hiring all from the same company that had been through similar experiences or similar space.
Even in the context of all of the history and proven metrics and experience from sales people and particularly VPS, culture is the most important hiring characteristic. If growth is moving through the roof, then they should be a good leader, they can manage a team and ultimately they’re believable. Previous individual contributors could be a red flag, but if the market/domain is different or the ACV is significantly alternate to their history, then this may not work out.
A successful VPS will have impact in 1 sales cycle or less. Metrics should be going up and to the right.
CXO Talk Live
Netsuite and Salesforce were founded in the same conversation above a liquor store with Larry Ellison! In 2002, Netsuite had < $1m of revenue and the stages of growth were nowhere near as obvious as they are today in SaaS. After 10 years, Netsuite looked at their top 50 employees because those were the ones that were most likely to be poached by their competitors.
When you go public, investors ask what are the next engines of growth and to clearly articulate those helped them through the post-IPO period. Netsuite was a distributed company from very early on with only 400 of 5000 located in Silicon Valley. The challenge of hiring people becomes less of an issue.
The biggest change in the Netsuite business has been moving from selling to small companies up to the medium sized organization. This required all factors of the business to adapt including sales, product and support. Enterprise sales and service organizations that don’t forget the original DNA are hard to create. Services are 40% of the revenue at Netsuite, but little or no profit is made on those. They are the necessary evil in order to turn the flywheel.
Building a World-Class Sales Organization
Erika’s first job was as an SDR at Oracle and lasted 17 years! She was most attracted to the a company that was a big idea, that was product first and easy for customers to acquire and then coupled with the commitment to culture and the success of the customer.
Bill joined MKTO because of the interest in a smaller organization, rather than the $1B+ as well the desire to sell to sales and marketing folk. He had a previous engagement with MKTO that went well. Founders were experienced and inspiring.
Zoom was experiencing 300%+ growth, huge NPS (62+) and long CAC which made it a very desirable company to join.
There are 3 things that motivate sales people.
The first is growth, both in career opportunities and in their customer development opportunities. If a sales rep can grow from SDR to Account Manager to Senior Account Manager, and so on, then while they continue to succeed and they can grow, the likelihood of long term involvement is high.
Recognition — President’s Club is an annual recognition that involves the significant others and can be a culture forming event at the company. But monthly, quarterly and half-yearly recognition is very important as well.
Compensation. Yes, sales folks so chase quota and are motivated by $$, but this is not the be-all and end-all.
Interesting that New Relic has a blended model of viral adoption and expansion as well as account management and this changes and moves across different markets. Customer Success and Renewals as well as Account Executives are commissioned on expansion revenue.
Onboarding teams at New Relic have lots of content and subject matter expertise to move the customer from 2nd base around the field because customers are better informed and better researched than ever before.
Top 10 Learnings Going to 10 Million
A Billion in Exits: 5 Things I’m Doing 5 Times Better This Time
Customer Success: Upsells, Cross-sells and Expansion
If there was 1 thing — just 1 thing that you could focus on as a customer success specialist, what’s the metric that you would focus on.
Answer: Retention. Grab those flagship customers, and do everything you can to retain them, love them and ensure that they become raving fans. Consulting, specialist customizations, anything that is required to keep those customers. Obviously, eventually you can push back and reduce customer expectations more inline with product vision, but at the start, this is really key.
When talking about Freemium “Users use, but Companies buy”. Some of the fastest sales cycles at Yammer were not those that started with freemium, but where Yammer was banned originally. Sales reps were able to sell through or around these barriers. Consider freemium as it applies to your market, but product adoption is going to be key.
If 1 customer is struggling with the product, then connect them with another customer that is realizing tremendous value. It’s always better coming from someone else’s mouth. User stories (the old case study) is still a powerful tool in the customer success / sales armory.
Learnings Getting to 100,000 Paid Subscribers
Creating a movement to cater for a transformative sale is actually really hard!
We did lots of things well and even more poorly, but this great little tool called WebsiteGrader was created to instead of giving away a part of the solution, give away the a tool that diagnoses the problem.
And back to retention which has come up a fair bit today. Absence of cancellation is not proof of the presence of delightion. They built a customer happiness index which took into account as much customer data as possible and the idea of the model was to be predictive. This became pretty accurate over time and allowed them to expand the customer’s usage before they actually cancelled. Interestingly, the correlation between this model and NPS is virtually non-existent. Hubspot likes looking at behavioral data, “what you do” not “what you say”.
LTV:CAC is a very key metric in that small business, horizontal market. How do we keep a customer longer and how do we expand their revenue over time? Some good things happen when you drift up in to the enterprise, however the market becomes more competitive as many other large companies that weren’t competitive all of a sudden become so. When you have these competitive tensions for resource, Hubspot will often find themselves where a department of an enterprise will take on the product independent of the larger corporate office.
