Created by Rishabh Srivastava, Founder of Loki.ai
This summary was largely done for my own note-taking, sharing it just in case it adds more value to other people.
I have no affiliation whatsoever with anyone in this note. This is a summary largely taken for my own reference, and may contain errors :)
Context
Source URL:
Why is it important: Talks about how B2B software companies can leverage both growth and sales to have an optimal outcome
Keywords
B2B, Sales, Marketing, Startups
Summary
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Highlights
B2B GrowthSales
Meta-trend that's happening right now: all the companies in the image below did Growth (almost a B2C approach) first, before they focused on Enterprise Sales (a traditional sales approach). This is called B2BGrowthSales
B2BGrowthSales is very advantageous to startups, and is very difficult for incumbents to defend against. Because the growth motion is marketing and community led, startups can come from anywhere
This trend cuts across many verticals - as shown in the image below. If companies don't use this strategy, they're actually at a disadvantage
How this evolved
Traditionally, Consumer Companies have been more product and marketing driven and Enterprise Companies have been more value-prop and sales driven. Traditionally, the table underneath has held true:
Consumer Companies
Typically marketing led
- Product simplicity matters: Product has to be simple to use and understand
- Brand matters
- Unit economics are defined by growth
Enterprise Companies
Typically sales led
- Product value matters: If you have a sales person selling something, you benefit from more knobs as it demonstrates more "value". I want something complicated that shows a lot of value so I can extract as many dollars as possible
- Relationships matter
- Unit economics are defined by sales
VC perspective
Investing in Consumer
- Users are fickle
- Will people love it?
- Everything depends on traction. "The exponential graph is smarter than whatever theory we have about the market"
- Investment is based on the product/design team. Invest after traction
Investing in Enterprise
- Buyers are predictable
- Will it work?
- Normally, the buying motion is based on some business need. If I'm an investor in B2B, I'll just reach out to the call the enterprise and ask them if they need it
- Investment is based on the sales/technical team. Invest early
What's happening now?
All of this is changing. Most modern B2B success stories have a combination of bottoms up growth and sales. Dropbox, Twilio, Attlassian, SurveyMonkey, Github. That changes everything
The Modern Enterprise Startup (or the Cloudflare Playbook)
- Starts from a very simple usecase and product. Could be open-source, could be freemium, could be an app
- Try to get users just like a consumer company would. Do all the bottoms up stuff to get adoption. Content marketing, SEO, social ads. Iterate on product-market fit until it's working
- Once it's working, you growth the engine and become a well-known brand
- Then, overlay a sales engine behind this. Monetize the user-base and gets sales efficiencies that are far beyond what you've typically seen in B2B
- Lastly, make products grow in complexity and value so you can actually deliver enterprise value
Why Now and Success Stoies
- Buying software is now a daily ritual that everybody does (barrier to adoption and purchase has fallen)
- There are now more users who have budget. You can sell to Marketing, HR etc. Not just IT
Example: SurveyMonkey got to 60M registrations in 10 years. Assuming you can monetize $20/user/year, that's a $1.2B/year business. Look at the quote below. Growth and self-serve alone isn't sufficient. You still have to build sales on top of that.
For Dropbox, 90% of revenue came from self-serve channels until 2018.
Managing both growth and sales is really hard
If you're a founder and you're managing both the growth and sales motions, the majority of these end up failing. There are a number of ways that this can fail:
A. Just doing bottoms-up growth with no sales
Unless you have a network effect like Github or LinkedIn, you often end up with slower revenue growth with this strategy
B. Sales with no bottoms-up growth
Bottoms-up growth is the most efficient way to get access to the buyer. You don't have any cred, you don't have any soft relationship. Core IT and Core Security buyers have too many people calling on existing relationships. So this becomes more and more difficult for startups to break through
C. Growth engine doesn't lead to the correct buyer
If you build a bottoms up growth engine, the users that adopt it may not end up being the users that actually buy the product. You'll have a growth engine that you really can't monetize because when you send the sales person in there, the person who's the user has no idea who'll actually pay for it. This is the #1 problem for open-source companies
D. Bottoms up growth can cannibalize sales
If you give too much away for free/cheap, you may have nothing to sell to enterprise
How to execute B2BGrowthSales/Summary
- Start simple. End Complicated. Start off with a very simple product, then adds bells and whistles
- Move from horizontal to vertical.
- Analytics and growth levers should be in product.