How to Transition a Slow Start Into a High Growth Startup
When most people think of a startup, they imagine a rapidly evolving company that finds product market fit and launches into the ether. But this doesn’t describe most enterprise startups. Not only do they tend to solve much more complex problems with market shifting concepts, the sales process and path to finding go-to-market fit is far more involved. As a result, going from an initial idea to a full-fledged solution can be a years-long endeavor, with significant changes in team and management along the way. In this article, we’ll see how startups can manage the winding path to success with insight from Ed Bellis of Kenna Security, a company that literally created a new market and started slow so it could eventually go fast in the enterprise security market.
Key insights
Be ready to adapt to real-world complexity.
No matter how simple the enterprise problem you’re trying to solve, the scale and complexity of the task can turn out to be daunting. Be prepared to change and adapt your plans in order to succeed.
Right person, right time.
In the beginning, enterprise software startups are best led by a highly technical CEO who is steeped in the details of what needs to be built. As the company scales, however, different talents are needed, and often different leadership.
Shifting to enterprise is more than a shift in leadership.
It’s a great idea to start initially selling to smaller businesses to hone a product, but selling to the enterprise is a much larger task, requiring different skill sets, processes, and team makeup.
Start with an idea
It was roughly 10 years ago that Ed Bellis, working as chief information security officer at Orbitz, found himself up against a vexing problem. The company was collecting a huge amount of security data and identifying a wide range of vulnerabilities. But Bellis’ team had no tool that could tell him which ones were urgent and which didn’t matter. Assessing and prioritizing them was a manual, time-intensive process. Looking around the marketplace, he was unable to find a solution to the problem.
This is not an unusual situation. Most enterprise startups get off the ground when the founder recognizes an unmet need in the marketplace. Often, that person is a technical manager in a large business who runs into a vexing pain point. He or she then searches the available marketplace, looking to find a solution, and when one isn’t found, a kernel of an idea begins to form.
Encountering real world complexity
Like Bellis, many startup founders identify a problem that seems fairly simple and technically feasible to solve. He and his co-founder, Jeff Heuer, knew that they needed to find a way to ingest all of a company’s security data, match it against exterior security data, and apply machine learning to prioritize vulnerabilities. But seemingly simple problems often run up against a situation that makes them far from easy to solve: scale.
To be blunt, many founders have a tendency to oversimplify what is needed and what is happening in their customers’ reality. In any enterprise, systems can be incredibly diverse and complex. Many large companies have grown by acquisition, and they rely on numerous legacy systems for everything from handling consumer data to driving human resources. In addition, the enterprise software market itself is massively fragmented, and it’s not uncommon for even major players in some categories to have no more than a 10% market share.
The best way around this problem is to make sure that you consistently conduct customer interviews throughout phases of development. And make sure they are honest interviews. Some companies have a tendency to use customer interactions to validate their existing assumptions. Instead, it’s much better to be honest about what the feedback says and expect that it will likely force you to change course over time. This can highlight nuances in process or use-cases that shift how the solution is developed.
In Kenna’s case, for example, they soon learned that merely ingesting the data of their target audience was a huge task that would eventually involve 60 separate integrations. Needless to say, this pushed the scope of work up massively.
“We didn’t have a big data problem, so much as a messy data problem,” says Bellis. “It was a long process. Had we known how much work would go into that piece, we would either have raised more to hire more people or tried to build out a lot more before we raised anything.”
Such a situation requires flexibility and adaptability — and setting realistic expectations. It’s important not to have too optimistic a timeline and to find experienced investment partners who can help scope the amount of work required and ensure the investment is adequate to achieve company’s ambitions.
Right person, right time
Early on, the best leader for a company developing a complex solution is someone who deeply understands the technical problem and how to solve it. Bellis is a good example of this, having spent 20 years as a practitioner in the field.
Technical founder/CEOs in the beginning can lean on their executive team, consultants, or VCs to help support them in functions they’re not as familiar with like hiring, marketing, and sales. That allows the technical CEO to remain focused on building the product, while still building the company brand, profile, and even revenue. At some point, however, the game changes. The company reaches a certain scale that calls for different kinds of leadership.
As Kenna grew and took on Series A funding in 2012, Bellis had a request. Up until then, the company had grown largely by serving small and medium-sized businesses. There was a relatively simple sales process centered around a webinar and a download link. As the company moved towards bigger and bigger prospects, however, it would need different leadership, someone who had the diverse skill set needed to build out organizations.
“My background for 20+ years is all in leading teams on the technical side,” he said, “I had no experience in sales and marketing and while it’s great to learn all of that, I’d rather not be the person learning it at the cost of the business.”
Finding a replacement CEO is never easy, but Bellis had a reasonably short list, with one standout candidate. Karim Toubba, a former vice president at Juniper Networks, in addition to ability, he, Bellis, and Heuer had a shared vision of how best to move the business forward. Toubba had the right mix of deep technical understanding with keen business acumen and experience successfully scaling an organization serving a complex, enterprise customer base. In addition, he was a natural storyteller which served Toubba as he functioned as a key salesperson and marketer early on.
Tooling up for the enterprise
Ed and the team began to recognize that the solution they were building was ideally suited to serve larger organizations which had more complex systems and bigger challenges. Kenna’s target, naturally, was the enterprise, the large organizations that could benefit most from software that prioritized what was most important to secure. True enterprise scale, however, required substantial organizational change.
“With SMBs, you can go have a WebEx demo and you’re done,” explains Bellis. “On the enterprise side, you have to have an enterprise sales account director, you need a sales engineer. There are multiple meetings, often requiring you to fly out to the potential client. And because of the amount of money involved, you also need to deal with the enterprise procurement department. It’s a big change.”
Often, this shift involves significant personnel changes. The person manning the phones to handle incoming calls from small businesses may not be the person that you want to be giving a PowerPoint presentation to senior executives at a Fortune 100 company.
This involved a massive retooling of the Kenna organization. The company now needed highly experienced account teams, B2B marketers, product management, field support, a customer experience team, and numerous other functional areas to support the growth. In recent years, the slow development to fit the needs of the market needs has paid off, giving way to rapid growth, and in the end the company solved the challenges and found itself in considerable demand at enterprises around the world.
While you might think every startup aspires to be an overnight unicorn, most startups do not follow that path. They require a long period of nurturing in order to be able to create the right product, find go to market fit, and eventually scale to serve some of the largest companies in the world. Kenna Security shows that with perseverance, a lot of hard work, and some good decision-making along the way, it’s possible to make that happen.
