Enterprise & Deep Tech Weekly
Issue #140: For the week ended April 26, 2022
Go-to-market system design
David Peterson
A few weeks ago, I used this space to think through how founders should go about setting priorities in advance of a fundraise. As I wrote last time, the questions investors ask, especially early on, aren’t that complicated. They are:
- Are you building something that people want? (This is what seed/series A investors care about most.)
- Do you have a system in place to sell it profitably at scale? (This is what series B/C investors care about most.)
In other words, do you have “product-market fit” and do you have “go-to-market fit”?
Last time, we talked about how to measure (and hopefully achieve) “product-market fit.” This time, we’ll talk about “go-to-market fit.” And to start, we’ll discuss go-to-market system design.
Go-to-market teams live and die by metrics. MQL, SQL, ACV, LTV, CAC. To understand your unit economics, which is critical to achieving go-to-market fit, you need to know these metrics cold. But not all go-to-market systems are the same. Depending on your product and how it is sold, the system you build (and the metrics that matter most) will differ…and the path to go-to-market fit will look different as well.
There are two go-to-market system “designs” that I come across most often.
First, the funnel. For companies with a classic enterprise sales motion, and no free tier, you should (likely) visualize your go-to-market system as a funnel.
This is how the system works (with the requisite metrics in parentheses):
- The marketing team fills the funnel (MQLs).
- Sales reviews and qualifies those leads (SQLs) and pushes the qualified leads through the sales process (SQL to conversion rate).
- New team from an existing account? That’s just a new lead (MQL or SQL).
Second, the fishing pond. For companies with free tiers and land/expand motions, I’ve found that the funnel visualization can actually be somewhat limiting. Instead, I recommend founders think about their go-to-market system as a fishing pond.
Sounds silly, but hear me out.
This is how the fishing pond works:
- The marketing team stocks the pond (new users).
- The product, education and scaled customer success team focus on helping the “fish” to “grow” (activation rate: look for an increase in product sophistication, usage, team size etc).
- Some users may upgrade by themselves (free to paid conversion rate), some may not.
- But regardless, once users hit a certain threshold (PQL), the sales team “goes fishing,” reaches out to those users (SQLs), and pushes them through the sales process (SQL to conversion rate).
- New team from an existing account? They go in the pond to fatten up like all the other new users.
What I find useful about this visualization, however silly, is it reveals two non-obvious metrics that are important to track, but easy to miss if you’re stuck thinking about your go-to-market system as a funnel.
The first is the product-qualified lead (PQL). What indicators do you get from users that they are ready to have a sales conversation? Is it about product sophistication? A self-serve upgrade? A sudden increase in team size? Long-term, consistent usage?
The second is the pond “replenishment rate.” How quickly are you able to replenish the PQLs that your sales team is snatching up? Is your sales team “over-fishing”? Is your activation rate too low? Does marketing need to stock the pond faster?
It’s easy to see how the health of your system depends on the stocking, activation, and fishing rates staying in balance. The replenishment rate metric gives you a view into just that.
Once you’ve determined the system you need to build, you can begin tracking the metrics that matter for you and setting the stage for scale. Next time, we’ll go deep on how to optimize your go-to-market system over time to achieve scalable unit economics.
David
EVENTS
Apr 28 / Funding your Growth with Venture Capital
David Peterson, Partner, Angular Ventures
Jun 1 / The Importance of Culture and Values As You Scale a Business
Oren Kaniel, Co-Founder & CEO, AppsFlyer
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