Building a $3.7B startup: View from AppDynamics’ Sales Leaders
Growing from an early-stage startup to becoming an IPO-ready technology company with over $300 million in annual recurring revenue (ARR) is one of the most difficult, unpredictable, and rewarding journeys anyone in Silicon Valley can take. This journey that AppDynamics took offers valuable insight to entrepreneurs and sales leaders looking to do the same. So I sat down with some of AppDynamics’ sales leaders to understand the critical role the sales team played in taking the company through hockey-stick growth.
What were some key levers the sales team used to rapidly scale AppDynamics?
One of the most impactful sales enablers the sales team leveraged was the company’s ability to “consumerize” its enterprise software. In fact, AppDynamics mastered this go-to-market strategy by allowing business users to download the software and start using it without needing to speak to anyone; this led the sales team to generate nearly $30 million ARR within the first three years. This focus on continuously removing friction in the sales process to generate early velocity and momentum became an ethos. In product development, it led AppDynamics to announce several disruptive solutions and capabilities in the next four years, including being recognized as an industry leader in cloud computing, being named one of the best places to work by Forbes, and growing revenue over 1,000%. And on January 24th, 2017 — a mere two days before it’s IPO — it was snapped up by Cisco for $3.7B, leading to the largest acquisition of a private company in the last two decades.
When is the right time to grow an enterprise sales team?
Knowing when and how to transition the company from a product focus toward a revenue focus is crucial to the success of a growing sales organization. The telltale sign that AppDynamics was ready to develop a world-class enterprise sales organization came within three years. By this time, the company had already developed and proven its capacity to build great technology, but it had not yet articulated it broadly. As a result, the sales team had been primarily focused on tactical deals in which the lifetime value of a partnership had not been sold. So starting in 2012, new sales leadership was brought in house, who instituted a clear metrics-based sales process which was also value framework focused. The sales leadership started shifting the entire company’s mindset away from celebrating any win toward celebrating key wins with identified value drivers. This led to several seven-figure wins, starting immediately in 2012. This strategic focus was further accelerated by hiring like-minded strong sales leaders in EMEA later in 2012, and focusing on global collaboration across strategic enterprise accounts. The mantra within the sales team evolved to believing that
“People can’t afford to just buy technology any more, they are moving to buying value which can be quantified. And people decide value on three levels:
1. Can you identify and quantify my problem?
2. Can you show me a path to attain the value of solving that problem?
3. Can you get me there fast?”
How do you build an enterprise sales organization?
From 2012 to 2017, the sales team grew from 18% of the headcount to 40%. This success in growing the sales team was a result of three strategic philosophies put into effect five years ago:
1. Creating a scalable, repeatable, and measurable sales process with the right leading indicators
2. Recruiting and developing a skilled team of enterprise sales reps to the right profile
3. Recruiting and developing a high character and performing team of leaders
The inside Sales Team, which became a key component of sales velocity lift, was built outside of Silicon Valley to reduce cost. AppDynamics’ sales leaders created a career path for inside sales reps who wanted a future in enterprise sales, so as to create a farm league and developmental opportunity for future Enterprise Sales Reps, while increasing sales productivity.
When it comes to hiring enterprise sales reps, AppDynamics had a simple formula:
“We hire to four key traits — Intelligence, Coachability, Character, Experience. We help shape the success path from there”.
Enterprise software sales is one of the hardest jobs in an organization because you’re managing many activities in parallel; an AE has to do the customer’s work in helping identify and quantify the customer’s challenges, so the appropriate path to resolution can be mapped out and committed to. To ensure that all sales reps were well equipped to articulate the value of AppDynamics, leadership created a first customer meeting deck early on. The first meeting deck was designed to resonate across the entire sales organization — AEs, SEs, sales development, support, marketing, and leadership, and focus on problem resolution and not on products.
AppDynamics sales leadership focused its content on the three Whys:
1. Why address a specific set of challenges?
2. Why us?
3. Why now?
Once the first meeting deck was complete, every single sales team member was put through a certification process. The entire team telling the same story consistently and with high quality is extremely powerful.
How do you seamlessly integrate a sales organization into the overall startup culture?
Onboarding the sales organization at AppDynamics wasn’t just about training the sales reps but also about helping them fit into the rest of the company. To achieve this in a seamless way, sales leadership focused on three key areas: communication and visibility, recognition, and giving the sales team a voice in the company. Sales leaders offered constant opportunities for recognition to “friends of sales” from across the organizations on quarterly calls, so everybody felt empowered and accountable. On the annual club trip, for example, many top performers from across the organization were invited to join the salespeople.
“The Appdynamics sales philosophy is summed up in the following way — Sales is a team sport. It starts with R&D, and it ends with sales, and it involves cross-functional collaboration the entire way.”
At AppDynamics, everyone has the opportunity to voice their opinions through periodic C-level management meetings that rotate across each regional sector of the business. At these meetings, fifteen people across the organization are invited to present three problems each, with the promise that the executive team will offer one of three responses: a) Great idea, let’s do it; b) Great idea, but we don’t have budget or time to commit to this in the next six months; c) Will not move forward. If the executive team commits to a project, an executive owner is assigned to make sure the project is completed along with a timeline for its completion.
All of this has led to a culture at AppDynamics that is built around meritocracy and one which rewards honesty, recognizes collaboration, and encourages people to help each other. If you aspire to take your startup through a hockey-stick growth curve towards a successful exit, you must have the right sales leaders in place who can implement the right processes at the right time and build the right culture to energize the entire organization to grow together.