AI transcript
Hi, and welcome to the A16Z podcast.
I’m Hannah, and in this episode, Bob Tinker,
author of the new book, Survival to Thrivel,
and founding CEO of Mobile Iron,
and Peter Levine, A16Z general partner,
talk with me all about finding go-to-market fit
for the enterprise startup.
Even once you’ve found product market fit,
a lot of enterprise companies never quite hit the gas
on growth and can stall out at that critical juncture.
So what are the right tools to figure out
that missing link of the right go-to-market model?
How do you unlock real growth from that moment?
What are the different sales and go-to-market models,
and how do you choose between them,
and what are the important metrics
you need to be paying attention to?
So Bob, let’s first maybe start by talking about
what product market fit means for the enterprise startup.
How is it different for the enterprise startup
versus other categories?
I think there’s a bug in Silicon Valley,
which is that at our core,
I think we’re fundamentally a product shop,
and we are really, really, really good
at helping entrepreneurs build products.
But we are not that good at helping entrepreneurs
build go-to-markets on the back of their products.
There’s not necessarily sort of the institutional knowledge
that has passed from company to company to company
about how to build go-to-markets.
For consumer companies,
when you find product market fit, the company takes off.
Magic happens, growth unlocks.
For enterprise and B2B companies,
where the sales process is more systematic,
customer decisions are more complicated,
you can get the product market fit
when you’re first 15, 20 customers,
but growth never really unlocks.
One of the real core challenges for the B2B community is,
there’s a lot of startups that get to product market fit,
but never unlock growth and just sort of bump along.
How do you know you’ve got product market fit
if you’re not actually growing?
Doesn’t it, by almost by definition,
mean you don’t have it if you’re not growing?
Well, I think it’s an order of magnitude
about how fast are you growing.
In many ways for enterprise companies,
getting to product market fit means,
can you get to five, 10, 15, 20 customers that gave you money
and are they actually using your product
and are they willing to say good things?
That’s a huge accomplishment.
It’s incredibly hard and there’s a lot of startups
and ideas that never make it to that point.
For core enterprise companies,
how do you go from winning 10 customers a month
to 50 customers a month to 100 customers a month,
the 500 customers a month?
And that’s where sort of this missing link is
between how do you win some customers
and prove you have value to,
how do you really unlock rapid growth?
There’s a difference.
One of the things that we’re seeing
that’s sort of a new phenomena are enterprise companies
that do have a bottoms up model,
whereby they do start with the consumer,
which is typically a employee in a company
where the product in some ways sells itself.
And so that’s another way of thinking
about product market fit in terms of,
can I get a product out there
that’s used by a large constituency of users?
It’s not 10 or 20.
It’s probably hundreds, thousands,
maybe hundreds of thousands of users
that start the flywheel going.
And then the question is,
how do you capitalize on that with more of a top down?
I call itself serve versus sales serve in those environments.
And we’re seeing more of that now.
I think we’re actually talking about the same thing.
Okay.
When we looked at a bunch of companies
that had sort of won their first 15, 20 customers,
either through going direct to employees,
bottoms up or tops down,
the ones that did unlock growth,
they were able to define their go to market playbook,
which is what are the repeatable steps
for how they find and win customers
over and over and over and over and over
and over and over and over again.
And having your repeatable playbook applies,
whether it’s tops down or bottoms up.
That’s an excellent point.
I mean, I think what you’re both saying,
it’s really interesting is like,
once you get that started,
whether you get it started from bottoms up
or from top down,
there’s this moment where you can kind of stall out
and get stuck or you can get things in motion
and start growth going.
And that moment of getting stuck,
I just wanna back up for a second and like zero in on that.
What does that tend to look like?
Like, where do people tend to flounder there
and like not kind of kick into gear?
You know, you finally got product market fit,
but then you just stall out.
What does that actually look like?
It’s kind of funny actually.
You sort of see this in the conversations
between entrepreneurs and Silicon Valley,
which is, hey, we won our first customers
and they sort of get told to go figure out this sales stuff,
go figure out this go to market stuff.
And it was not a very organized conversation around,
well, what does that mean?
There’s a number of reasons why growth never really unlocks.
It can be founder selling.
It can be not finding urgency.
It can be spreading your resources too thin.
One of the places where I see these companies stall out
is they had founder selling
to be able to get to the first 10, 15, 20 customers.
And then when we start to add sales people,
they’re gonna market model.
They find, oh, wait a minute,
a regular sales or marketing person
can’t actually do what the founder was doing.
So, you know, people are gonna,
oh, maybe our sales team or marketing people
don’t really understand the product, they can’t sell it.
Like you end up in these sort of dysfunctions
because I think it didn’t really have
sort of the true market test of have you figured out
how to find and win customers
without relying on the founder.
That’s usually the first place I see things stall out
is sort of over reliance on founder selling.
The second one is trying to do too many things at once.
Trying to do two or three, go to market model at the same time.
We’re gonna do tops down, we’re gonna do bottoms up,
we’re gonna do framing, we’re gonna do market led.
And when you have relatively small number of resources,
they end up scattered so far
that you never actually really figure out
what the repeatable recipe is.
So you end up spending an enormous amount of energy
with a very little result.
So being able to pick your model and focus matters.
The third place where I think people stall out
is they think that they know their passion
for whatever their initial idea was
and may not necessarily be the thing
that actually unlocks growth.
There’s sort of a funny story we have
from the early days of Mobile Iron,
which was we were early in mobile security.
And when we first started,
we built this security and policy engine
for any mobile operating system.
So enterprises could adopt mobility
as a first class citizen, yay, we’re really proud of it.
The really forward thinking advanced customers would get it,
but a lot of them were just sort of looking at us
and be like, why do I need that?
And we weren’t able to translate that
into what’s the problem that got the customer
to say, okay, I need that right now.
And eventually what we did is we figured out
that that problem was,
dude, I need help with my iPhones.
And that’s the urgency.
And that was the urgency.
I think there’s one other related piece
with founders selling,
which is a very interesting point
’cause we always encourage founders to go out
and sell, right?
It’s super important from a learning perspective.
To learn. Absolutely.
And then, you know, this whole notion
of the continuance of founders selling,
the founders of our companies
tend to be technical founders, right?
And they’re so intimate with the product
and the features and all that.
And often they view sales as a bit of a black box.
In my experience, the growth kind of stops
when they try to run sales too much
and kind of get involved in an area
where they have not a lot of experience, right?
And then kind of, you know,
hiring the sales VP or sales leader
becomes a bit of an issue.
And then the founders trying to micromanage
the sales leader because–
By saying, just do what I do.
I’m stressed out just thinking about it.
All of, you know, and then the sales leader
doesn’t quite work out and you have to fire people
and like it creates a, you know,
a lot of turmoil within the organization.
So it’s really like this whole founders selling
and then transitioning to a repeatable model,
i.e. no founders selling.
I mean, you can help out,
but not founder-led selling
is a really interesting transition point.
I mean, we see that quite a bit where, you know,
it’s like it’s kind of muddled up in there.
Are you gonna be able to hand the baton
to that machinery? Yeah, are you labeled
and do you have enough knowledge
to actually go and manage the things that are important
without getting overly involved, right?
It sounds very much like this moment
of reckoning, right?
Where you’re about to go into this
and you talk about it like this moment of reckoning
is sort of a missing link
that people don’t talk about, right?
You call it go to market fit.
So my first question about that
is how many people even recognize
that it is a moment of reckoning like that?
Or did they just kind of,
is it just, you just sort of slide into it
and then you’re either in or not?
You typically slide and fumble your way into it.
Where the light bulb usually goes off
that people feel like, uh-oh,
we may not have figured out
a repeatable go to market model
is you win your first 15, 20 customers,
maybe with founder-led selling
and you say, all right,
we’ve figured out product market fit,
it’s time to grow.
So the board comes in and says, okay,
you figured out product market fit,
it’s time to grow, go do sales.
Go hire VP of sales, go sell.
And so you go hire three or four people,
your burn rate goes up,
you put together some PowerPoint pitches,
and then you wake up six months later
and you went from 20 customers to like 24 or 25.
And your burn rate accelerates
and everybody’s looking at each other,
really stressed out.
And it’s a really scary moment for a company
to sort of say, all right,
we just hit the gas to go grow,
but we didn’t actually really have
our repeatable go to market model figured out.
So that’s usually when the reckoning comes.
– You know, also when that reckoning moment comes,
and I’ve seen this many times,
you’re also, the company is also debating,
is it a sales problem or is it a product problem?
You’re trying to understand,
like maybe the product that I’ve built really isn’t,
doesn’t solve, I love this urgency concept,
doesn’t really satisfy the urgency of the customer.
And so where, what are the levers that you pull
at that particular point in time to self-correct?
Is it a product problem or is it a go to market problem?
Right, and clearly over hiring sales people
and all that are symptoms of something, right?
Maybe you can’t reproduce the founder selling,
product’s great, but I can’t reproduce the selling.
Or the product isn’t hitting the market
or whatever, the only,
and it’s kind of a blended problem at that point in time.
– I mean, how do you start analyzing
and pulling apart the knot before,
presumably before you start building?
– Well, look, all these things are presumably
somewhat self-correctable,
provided that you have enough runway to go self-correct this.
I mean, there’s no substitute for awesome product market fit
and some companies nail it right away
and other companies start in one place
and migrate to another.
The problem is, is if you run out of runway, i.e. cash,
you don’t have time to figure it out.
So one of the elements is that before a company goes
and hires to Bob’s point,
the VP and once you hire a sales VP,
what do they want to go do?
Hire a bunch of reps.
So now you have all this expense
without knowing the urgency
or what’s actually going to work.
When I was CEO, I used this phrase with my team.
I said, we’re not going to expand the sales organization
till we see the whites of their eyes.
And I don’t know if you remember like Bunker Hill, right?
You only had a few bullets to shoot
and you weren’t instructed to not shoot the bullets
until you saw the whites of the eyes coming over the hill.
And it’s some subjectivity here to say,
look, when the customer starts demanding this,
then we’re going to go build a sales organization, right?
Or add the reproducibility.
And I waited for what some people could argue
is too long a time.
But I think we over rotate too soon
to go build up all this capacity
and all this, you know, customer support
and marketing and sales and all this stuff
when there’s no customer ready to actually go buy it.
I mean, what you’re basically saying
is wait until the urgency is painful.
Wait till the, or exactly, wait till you feel it, right?
There’s a really interesting dynamic here,
which I see, you know, and we even felt this,
which was that, hey, you figured out
your first 10 or 15 customers go hire sales.
And that’s sort of the mean that gets out there.
Wait a minute, is that what we really need to do?
And I think one of the mistakes is go hire VBS sales.
That’s what the first thing you need to do when you go sell.
My personal opinion on that is that’s not the right thing to do.
You need to find, like go hire more of like a Davy Crockett
type sales rep that can sell,
but also has a little bit of product and product marketing
in them because really what you’re still trying to do
right there is find your path through the go to market woods
and have it be done by a sales rep
or somebody that’s not the founder.
I think that’s really step one
because that’s the same way you iterate on a product
to find product market fit.
You need to iterate on your go to market and your pitch
and what’s the urgency and what’s the sales model
the same way.
And you need to iterate with those one or two
sort of Davy Crockett type people
that are able to help you find the path.
I mean, I’ve, the sales videos that I’ve done,
we point to this concept called the sales learning curve,
which Mark Leslie developed,
which talks about the renaissance sales rep
in that early phase.
They typically have a combination of technical skills
and sales skills and they can do a lot of things.
They’re kind of like a Swiss army knife of a sales person.
And they ask customers what about a problem right here?
What about a problem right there?
They look a little bit to the left,
they look a little bit to the right.
Figure things out.
You want to hire a couple of those people
or early on to help figure things out.
Okay. So say you have this reckoning and you say,
and you think, okay, shit, I got to figure this out.
What if you have already hired a VP of sales?
Like how do you kind of pause
and then go forward saying, okay,
now we’re going to systematically figure this out?
Maybe the question is,
how could we help avoid the reckoning?
Aren’t you saying it comes inevitably?
No, I don’t think it is.
I think the way to avoid that really painful,
like, oh crap, reckoning is as you shift off founder selling
and iterating on your product,
starting to be thinking your background about,
how do we iterate on go to market?
The same way you iterate on product.
And you’re looking a little bit to the left
or a little bit to the right for the urgency.
You’re trying to figure out like, do you go in bottoms up
or do you come in tops down?
Do you figure out your sales model?
This is something that I got horrendously wrong
as a first time CEO,
is that I thought like having a go to market playbook
essentially meant you have a really good PowerPoint pitch
and some good sales tactics.
And that was horrendously wrong
because your go to market playbook really is paying attention
to how you’re able to find customers,
move them through the buying journey,
what’s working, what’s not working
and how you ultimately get them to decide
and onboard and use your product.
And your early customer wins,
the universe is teaching you a lesson.
So pay really close attention to those first 10 or 15
or 20 wins to not just did you win it or not,
but like, how’d you get there?
What was the journey?
And how can you start to get insight from that
to figure out the repeatability,
really pay attention to what’s the repeatable playbook
and observe and iterate on that.
Then you can avoid that reckoning moment
because you start to see these pieces come together
and you start to see the whites of their eyes.
That’s when you know, okay, it’s time to hit the go button
and shift from sort of Davey Crockett
to like Braveheart or Joan of Arc.
And is that when you know
you’ve found the right go to market fit?
You know when you’re out of this sort of conundrum,
when you actually have reproducibility
from a sales capacity standpoint
or some reproducibility from a pipeline
to conversion standpoint, right?
When you’re out of it phase is
if I hire a salesperson and they cost X
and it takes Y time to generate Z revenue.
And if I can then put literally put on a spreadsheet
and say I’m hiring one rep, two reps, three reps, four reps
and they can reproduce what’s on the spreadsheet,
that’s the reproducible model.
Yeah, now you’re moving, the flywheel is going.
Right, the flywheel is going
and you can really at that point
can start to predict the future, right?
It sounds like you can start to trust a little bit,
like relax and to trust a little bit from that.
There really are those reproducible models
and even if it’s bottoms up
and it’s not hiring somebody,
it may be I have these leads that come in
for a marketing program turns into 100,000 users
and those 100,000 users, 5% of them pay
and that’s the model.
And I convert after three months of use
and so those metrics all have shapes to it, right?
The pipeline has a shape to it on sort of freemium,
sales reps have a shape to it on onboarding
and there are industry standards on all of this
but every company will have its own shape, right?
Yeah, this idea of how do you know you found it
and you’re out of it,
I think is a really profound question.
At the essence of this repeatability
is if you hire somebody new in sales,
do they know what to do?
Like if you have go-to-market fit, you’ve got urgency,
you’ve got your sales model, you’ve got your playbook,
you can hire somebody new in sales,
they kind of know what to do.
You can be like, do this and we win.
It’s like you bring in more people or add more resources,
you kind of know what to do.
And I think that’s really sort of the essence of this test
which is if you have that, I think you’re out of it.
And when you do that, you start to put more into the engine
and you feel that momentum of that repeatable go-to-market
and you go from winning five customers to 10 to 20
to 50, 100 to 500.
What other kinds of metrics are you looking at
to help you define that we’re now out of the woods?
You found this go-to-market fit
and you’re actually hitting real gas
instead of like flooding the engine.
There are measurements that are,
I believe are very important.
One of the key metrics for me is,
how do you know you’re in what we call execution mode,
this kind of rinse and repeat on the sales model?
What I like to look at is that a sales person
is generating greater than three times their loaded cost,
meaning base plus commission.
Let’s say a sales person cost $500,000 a year
or $200,000 a year,
they need to generate a three X multiple on that cost.
And it needs to be across the organization.
You can’t just have one person do it
and it can’t just be the average
because that’s a very misleading indicator.
I could have one sales rep who crushes it
and everyone else does zero.
And if I average that, I would say,
well, yeah, our 10 people are all over the three X metric,
but it happens to be one person.
So I would do it as 70% of the sales organization
need to be generating three X their base cost.
And that’s how you know you’re sort of out of this phase.
And then that’s also a way of knowing
when you should hire more people
because as that number gets greater and greater,
let’s say a sales person can generate five X their cost
or six X their cost, you’re hiring too slowly.
So there’s more deals that that person can hire
and you’re probably leaving things on the table.
So you want to normalize between four to five,
around four X their loaded costs and keep an eye on that.
If it’s too little, you probably have over hired, right?
Where a person only is generating one X
and that’s probably in the early days.
So that’s kind of, that’s a metric that is very important
in terms of, and it’s very simple, right?
Like it’s not this complex like-
Yeah, you can remember that formula.
Yeah, it’s just, and it tends to work reasonably well.
If you think about sort of the end to end sales
and marketing process, do you see as you invest more
in the front end of the pipeline,
you get more leads and more pipeline.
Like as you put X dollars in, you get Y out.
Like is it still linear or even getting better than linear?
Or are you starting to see decreasing marginal returns?
That’s sort of a way to know how hard to push the gas pedal.
When it comes to thinking about hiring reps
or sales engineers, it’s really all about ramp time.
Do your reps reach full productivity in nine months,
12 months, six months or three months?
The moment for me when I knew at Mobile Iron,
we had found good market fit
was when my VPS sales came in and said,
“Hey, I’m willing to take up my quota
“basically as high as you want
“because as long as you let me hire as many reps as I can,
“because I can get them productive in six months
“and I have so many opportunities I can’t get to them.”
He felt like he had a repeatable recipe
to bring new reps on and make them productive
and get them ramped in six months.
That was the point where for me,
like the bit flipped, we were sort of out of the woods.
One of the other elements to look at is pipeline itself.
One of the metrics to be used in the industry
is at the beginning of the quarter,
you wanna have between three and five times
the pipeline to close the quarter, okay?
If you don’t have four times the pipeline
at the beginning of the quarter,
you’re not gonna make your number.
And if you have over at the beginning of the quarter,
the beginning of the year might have been a six, seven, eight,
which means that you’re dropping opportunities on the floor
because the top of the pipeline is fat with opportunities
and you don’t have enough capacity to go and do it, right?
And so looking at that pipeline is also another way
to kind of help modulate how you’re gonna go hire salespeople
to either take up the slack,
meaning get after more opportunities
or don’t hire so many people if the pipeline isn’t there yet.
It sounds like temperature reads almost.
Keeping the metrics very simple
is way more important than having too many metrics
and then you’re trying to measure too many things.
We wanna measure everything, right?
And it gets too complicated
and then you don’t know exactly what to fix.
The fascinating thing that happens
is once you get this repeatable playbook in place
where you find and win customers
and you sort of, people know what needs to be done
at each part of it,
all of a sudden the company now sees
the things they’re working on,
the people in marketing, the people in engineering,
the people in support that are working on these different
things that support the go-to-market playbook,
they now see how what they’re working on
ties to the repeatable go-to-market playbook.
And it was, I didn’t sort of realize this going into this,
but that turned out to be a very powerful sort of
unifying force for the company
to know how what they were working on
tied to how we’re gonna grow the business, right?
And once you understand that,
then you’re out of this sort of mode of,
well, iterating, go-to-market and all that stuff.
And then you can grow from there.
Now, let me point out that if I enter into a new geography
or I build another product as part of the company,
you start over again, let’s say a US geography
and I wanna expand internationally,
maybe my go-to-market model is actually different.
It very well could be.
I might be direct in the US,
but I might go through the channel in Europe.
Exactly.
In which case I have to learn that over again
because I haven’t learned it.
Or I do in partner selling or whatever it might be.
So that’s another point of how do you know you’re out of it?
A company might get into it again
when you build a new product or go into a new geography.
So if we go back to that moment of trying to find
with a Davy Crockett, like feeling your way through the woods
to the right sales model, getting gathering information,
what are some of the questions you’re asking at that point
to find and identify what the right sales model is,
especially if you’re that founder
who doesn’t really know who for,
it is a kind of black box.
Yeah, this is a great question
because there’s all sorts of different types
of sales models you hear about.
And there are certain sales models that are kind of faddish
that get pushed on you.
Like this has been Vogue right now.
Oh, like a freemium sales model is really exciting.
So you should definitely do that.
Or you should follow Atlassian’s model
and have the no sales people product led model.
Like you hear about all these different things
as a founder and a CEO and you’re honestly like,
how do I figure out which ones to do?
So if you sort of think about sales models as a spectrum,
on the far left, you have heavy touch sales led,
which you hire sales reps
to call on customers to do big deals.
In the middle where marketing
does the front end of the sales process,
they find prospects, they drive them to an online eval,
and then you watch the metrics on the online eval
and then an inside sales person calls them
and takes the deal from there.
So it’s like 50/50 marketing sales.
And then on the far right,
you have a product led or zero touch sales model
where there’s no sales people
and literally the customer goes from find to eval
to online to purchase to upsell without a sales rep.
So like in Atlassian or Twilio.
We talked about this on a podcast recently
on the enterprise products about bottoms up growth.
Martin used a metaphor of a slider bar, right?
There’s a slider bar from total organic bottoms up growth
up to like heavy touch.
And where are you, how do you know where you are?
Yeah, and this is something I’ve certainly seen
to the venture capital industry push companies
to sort of the zero touch product led model
because it’s awesome if you can make it work
’cause it’s super capital efficient.
The problem is that it doesn’t work
for all companies and products.
So the most important thing here is to pick the right model
for your product and your customers.
So then how do you do that?
If you pay attention to how your customer buys,
like what is that customer journey look like,
that will lead you to one sales model or another.
For example, you can distill it all down to one question,
which is how does the customer decide to buy your product?
How do you decide to buy?
Not how do they physically purchase it?
It’s how they decide in their mind to say I’m gonna buy.
If the buyer and decider are the same person
and you can reach them with digital marketing,
you can do a product led at Blasian Twilio sales model.
If the product and buyer are sort of two people
that are right next to each other,
like the buyer is the VP of marketing
and the decider is the CEO,
you can do a marketing led sales model
where it’s relatively small number of people involved.
If it’s a committee decision where you’d have the CIO,
the chief security officer,
the VP of infrastructure involved,
it’s really hard to do a marketing led
or product led when you have a committee decision.
As you’re winning those early customers,
pay attention, like watch the cognitive process
inside those customers
for how they’re actually deciding to buy.
I think that’s the biggest clue to wear
on that slider bar you end up.
They’re correlated with big size, small deals,
but I think the essence of it is actually this,
how does the customer make the mental decision to buy?
– I might add one more element in sort of the individual
being the buyer and the decider in one person
versus committee.
I mean, in some ways the product itself
has to be simple enough.
If it’s an individual person,
it has to be easy to understand.
If you have a super complex product
going after the individual,
their head might spin because it’s like,
how do I even think about,
it’s super complicated to use.
It’s complicated to try, complicated to install.
How complex is your product to allow the decider to do it
with whatever vehicle you’re actually explaining
those features, right?
The real exciting element to me is it was always assumed,
oh, enterprise direct sales
because the product is complicated, blah, blah, blah.
And consumer products would be this,
sort of viral uptake decision makers, the buyer.
I think that there is a lot of really interesting
innovation in ease of use for enterprise products
that are now being decided and bought by individuals.
Zoom is a great example.
GitHub is a good example.
Twilio is a good example.
Dropbox is a good example.
There are historical products,
which were super complicated in each of those areas
where you required an army of bought deciders
and an army of salespeople to get something like,
what does this thing do?
And all that stuff and how does it work?
And I think that companies now
who take user interface and design
and simplicity of product in the enterprise
are gonna be big winners.
You can’t just say we’re gonna go to do this,
Atlassian bottoms up model,
but does the product have the elegance
to be able to be sold without a sales organization?
Enterprise companies actually are looking
a little bit more like consumer companies
when it comes to product design,
fit and finish and all of that,
which before, it was like,
hey, like if I had a command line interface,
that’s enough with a thousand page user manual.
I think this is where this sort of go-to-market fit
and all these other linking go-to-market
and product come together.
It used to be that product was sort of over here
and did product stuff and sales is over here,
did sales stuff and was product management’s job
to figure out the middle.
What’s really neat about this is you will start
to see iterations between how does the go-to-market
put requirements on the product
and then how does the product influence the go-to-market?
There’s an iterative loop between those now
that I think is actually in many ways
sort of changing almost the cultures
of how enterprise products get built.
– I agree.
– Okay, so you mentioned this very specific moment
when you know your metrics, your product is dialed in,
you have a repeatable go-to-market strategy,
pick the right business model.
What are some of the like, whoops, don’t step in that.
Like, okay, I got it good.
Don’t do this moment.
The biggest pitfalls basically that you can come to.
– Yeah, so in the beginning of building a startup,
your mission is just don’t die.
(laughs)
It really is, just live to fight another day.
When you find go-to-market fit
and you start to feel that momentum, the world changes.
You shift from this, how do we not die mode to,
oh crap, how do we win?
And you’ve really entered a different mindset.
Once a company makes this shift from how do we not die
and how do we win, all hell breaks loose.
And at this point, your mission becomes,
how do we now accelerate the business
to become a category leader?
So you have to go from being sort of ruthlessly frugal,
pinching every penny and counting every nickel
to almost like calculated recklessness.
We’re gonna try some things
and spend some money on things and hire some people,
even though you’re not sure it’s totally gonna work.
And that’s a hard mindset shift for founders.
The second thing that changes is the company culture,
which is that usually up until this point,
you’ve been a very product-led culture
and that’s part of what has made the company successful.
But now as part of accelerating the category leader,
the company needs to have a balanced culture
between valuing both product and go-to-market
as equal citizens in the culture.
And those kind of culture shifts are actually hard for teams.
It’s a journey.
And this manifests in all sorts of ways like just hiring.
All of a sudden, recruiting becomes a core competency
for the company, finding talent becomes a core competency.
Managers are now evaluated
for how well they can hit hiring targets,
’cause that’s the biggest thing
that’s gonna get in your way of execution.
And then how do you actually onboard all these people
and make them effective and part of the culture?
‘Cause what actually happens at this point
is you can end up fracturing the culture of the company.
And in many ways, sort of committing hairy carry
by growing too fast
without actually onboarding people effectively.
– At that point, one of the key attributes of one of the key,
it’s not the only one attributes
being a great CEO and great leader
is hiring and retaining a world-class management team.
– That is exactly right.
– What I see is sub-optimizations made
are just not having enough pattern matching skills
to actually go recruit the right people for the right roles.
And I think that that then results in sub-optimal executives
kind of not all being great at what they do.
And then you run into problems that way
because scaling the organization
is about having reproducibility and being able to hire people,
being able to build processes into the organization.
And if the executive team can handle it,
they’re not capable of scaling, you run into a lot of problems.
– Yeah, I think that’s exactly right.
I mean, for me, I was the first time CEO in 2008.
And my job changed profoundly.
It was more like from Captain America
and sort of the platoon in the woods
to more like Captain America and the Avengers,
where you had to go hire your band of Avengers
where each one of your executives
has to have a special superpower
that’s better than you are at that job.
– Or that you did not have.
You have the self-knowledge to know you didn’t have.
– So in many ways, this hiring the leadership team
that Peter’s talking about is a tough transition
for the CEO because the CEO has to let go
of things that he or she was previously doing
that they may think are important and are scared of.
It’s also sort of create some insecurity
because all of a sudden you hire these people
who are grade A executives that join.
And the first thing they’re gonna do
is basically look at all the things you’ve been working on
and basically look at how screwed up they are
and their job is to fix them.
It creates this weird feeling of sort of insecurity
calling your baby ugly.
But I mean, if you hire a grade A VP of sales,
they’re gonna absolutely push you
and the rest of the organization
as they try and drive to scale.
And it’s gonna be uncomfortable.
And if it’s not, you may have not hired the right person.
– So it sounds to me like so much of what you’re describing
is about this ability to kind of look around you
and notice what’s, learn from it and then shift mindsets
or mechanisms or plans for the future based on that.
So it’s kind of about flexibility, right?
How do you stay in that mode as the company grows
and evolves and you are constantly being forced
to sort of examine and then shift?
– I think self-awareness is incredibly important
because you constantly need to be reflecting about
what are I and what are we doing well and not well
and what do we need to get better at?
We spend so much time learning
and in many ways the very things that make us successful
in getting from A to B, for instance,
getting through the survival phase of the company,
many of those same things actually now get in the way
or could kill you at the next stage.
So in addition to learning what you need to do next
and how to be a leader at the next stage of the company,
there needs to be a very conscious effort
to look in the mirror and perhaps unlearn
some of the things that got you there.
– I often describe running a company at different phases
and your ability to turn the ship
kind of like a rowboat versus a ship.
When you’re a small company
and you’re like in this little rowboat
and one big wave can sink you,
you can use the oars and turn the thing on a dime.
And then your boat gets bigger and bigger and bigger
and it’s way harder to turn
and think about a big company,
they’re like a freaking cruise ship, right?
And to turn that thing,
you have to start two miles ahead to turn it.
So what does that mean in terms of running a company?
To me, the horizon by which you look at as a CEO
gets farther and farther out in terms of planning,
right?
Like, if your company is reasonable size,
there’s almost nothing you can do this quarter
to change the outcome of this quarter.
You’re not gonna, like,
maybe you can help with a sales deal or whatever.
It’s probably like,
what can I do now to impact next year?
If you’re real small,
what I do today can impact tomorrow.
There’s always new projects and new things
that are the little boats that may surround the big boat,
you know, in which case you can do things much more nimbly.
If it’s the big thing,
it’s hard to go and change on a dime
when things are generally going in some direction, right?
CEOs and this whole self-awareness should be aware
of kind of the time horizon by which I’m operating at
and where my influence can most adequately be impacted
given that horizon.
– And when you need to pull out your telescope, basically.
– That’s wonderful.
Thanks so much for joining us on the A16Z podcast.
– My pleasure, our pleasure.
Thanks, Bob.
– Thanks.
I’m Hannah, and in this episode, Bob Tinker,
author of the new book, Survival to Thrivel,
and founding CEO of Mobile Iron,
and Peter Levine, A16Z general partner,
talk with me all about finding go-to-market fit
for the enterprise startup.
Even once you’ve found product market fit,
a lot of enterprise companies never quite hit the gas
on growth and can stall out at that critical juncture.
So what are the right tools to figure out
that missing link of the right go-to-market model?
How do you unlock real growth from that moment?
What are the different sales and go-to-market models,
and how do you choose between them,
and what are the important metrics
you need to be paying attention to?
So Bob, let’s first maybe start by talking about
what product market fit means for the enterprise startup.
How is it different for the enterprise startup
versus other categories?
I think there’s a bug in Silicon Valley,
which is that at our core,
I think we’re fundamentally a product shop,
and we are really, really, really good
at helping entrepreneurs build products.
But we are not that good at helping entrepreneurs
build go-to-markets on the back of their products.
There’s not necessarily sort of the institutional knowledge
that has passed from company to company to company
about how to build go-to-markets.
For consumer companies,
when you find product market fit, the company takes off.
Magic happens, growth unlocks.
For enterprise and B2B companies,
where the sales process is more systematic,
customer decisions are more complicated,
you can get the product market fit
when you’re first 15, 20 customers,
but growth never really unlocks.
One of the real core challenges for the B2B community is,
there’s a lot of startups that get to product market fit,
but never unlock growth and just sort of bump along.
How do you know you’ve got product market fit
if you’re not actually growing?
Doesn’t it, by almost by definition,
mean you don’t have it if you’re not growing?
Well, I think it’s an order of magnitude
about how fast are you growing.
In many ways for enterprise companies,
getting to product market fit means,
can you get to five, 10, 15, 20 customers that gave you money
and are they actually using your product
and are they willing to say good things?
That’s a huge accomplishment.
It’s incredibly hard and there’s a lot of startups
and ideas that never make it to that point.
For core enterprise companies,
how do you go from winning 10 customers a month
to 50 customers a month to 100 customers a month,
the 500 customers a month?
And that’s where sort of this missing link is
between how do you win some customers
and prove you have value to,
how do you really unlock rapid growth?
There’s a difference.
One of the things that we’re seeing
that’s sort of a new phenomena are enterprise companies
that do have a bottoms up model,
whereby they do start with the consumer,
which is typically a employee in a company
where the product in some ways sells itself.
And so that’s another way of thinking
about product market fit in terms of,
can I get a product out there
that’s used by a large constituency of users?
It’s not 10 or 20.
It’s probably hundreds, thousands,
maybe hundreds of thousands of users
that start the flywheel going.
And then the question is,
how do you capitalize on that with more of a top down?
I call itself serve versus sales serve in those environments.
And we’re seeing more of that now.
I think we’re actually talking about the same thing.
Okay.
When we looked at a bunch of companies
that had sort of won their first 15, 20 customers,
either through going direct to employees,
bottoms up or tops down,
the ones that did unlock growth,
they were able to define their go to market playbook,
which is what are the repeatable steps
for how they find and win customers
over and over and over and over and over
and over and over and over again.
And having your repeatable playbook applies,
whether it’s tops down or bottoms up.
That’s an excellent point.
I mean, I think what you’re both saying,
it’s really interesting is like,
once you get that started,
whether you get it started from bottoms up
or from top down,
there’s this moment where you can kind of stall out
and get stuck or you can get things in motion
and start growth going.
And that moment of getting stuck,
I just wanna back up for a second and like zero in on that.
What does that tend to look like?
Like, where do people tend to flounder there
and like not kind of kick into gear?
You know, you finally got product market fit,
but then you just stall out.
What does that actually look like?
It’s kind of funny actually.
You sort of see this in the conversations
between entrepreneurs and Silicon Valley,
which is, hey, we won our first customers
and they sort of get told to go figure out this sales stuff,
go figure out this go to market stuff.
And it was not a very organized conversation around,
well, what does that mean?
There’s a number of reasons why growth never really unlocks.
It can be founder selling.
It can be not finding urgency.
It can be spreading your resources too thin.
One of the places where I see these companies stall out
is they had founder selling
to be able to get to the first 10, 15, 20 customers.
And then when we start to add sales people,
they’re gonna market model.
They find, oh, wait a minute,
a regular sales or marketing person
can’t actually do what the founder was doing.
So, you know, people are gonna,
oh, maybe our sales team or marketing people
don’t really understand the product, they can’t sell it.
Like you end up in these sort of dysfunctions
because I think it didn’t really have
sort of the true market test of have you figured out
how to find and win customers
without relying on the founder.
That’s usually the first place I see things stall out
is sort of over reliance on founder selling.
The second one is trying to do too many things at once.
Trying to do two or three, go to market model at the same time.
We’re gonna do tops down, we’re gonna do bottoms up,
we’re gonna do framing, we’re gonna do market led.
And when you have relatively small number of resources,
they end up scattered so far
that you never actually really figure out
what the repeatable recipe is.
So you end up spending an enormous amount of energy
with a very little result.
So being able to pick your model and focus matters.
The third place where I think people stall out
is they think that they know their passion
for whatever their initial idea was
and may not necessarily be the thing
that actually unlocks growth.
There’s sort of a funny story we have
from the early days of Mobile Iron,
which was we were early in mobile security.
And when we first started,
we built this security and policy engine
for any mobile operating system.
So enterprises could adopt mobility
as a first class citizen, yay, we’re really proud of it.
The really forward thinking advanced customers would get it,
but a lot of them were just sort of looking at us
and be like, why do I need that?
And we weren’t able to translate that
into what’s the problem that got the customer
to say, okay, I need that right now.
And eventually what we did is we figured out
that that problem was,
dude, I need help with my iPhones.
And that’s the urgency.
And that was the urgency.
I think there’s one other related piece
with founders selling,
which is a very interesting point
’cause we always encourage founders to go out
and sell, right?
It’s super important from a learning perspective.
To learn. Absolutely.
And then, you know, this whole notion
of the continuance of founders selling,
the founders of our companies
tend to be technical founders, right?
And they’re so intimate with the product
and the features and all that.
And often they view sales as a bit of a black box.
In my experience, the growth kind of stops
when they try to run sales too much
and kind of get involved in an area
where they have not a lot of experience, right?
And then kind of, you know,
hiring the sales VP or sales leader
becomes a bit of an issue.
And then the founders trying to micromanage
the sales leader because–
By saying, just do what I do.
I’m stressed out just thinking about it.
All of, you know, and then the sales leader
doesn’t quite work out and you have to fire people
and like it creates a, you know,
a lot of turmoil within the organization.
So it’s really like this whole founders selling
and then transitioning to a repeatable model,
i.e. no founders selling.
I mean, you can help out,
but not founder-led selling
is a really interesting transition point.
I mean, we see that quite a bit where, you know,
it’s like it’s kind of muddled up in there.
Are you gonna be able to hand the baton
to that machinery? Yeah, are you labeled
and do you have enough knowledge
to actually go and manage the things that are important
without getting overly involved, right?
It sounds very much like this moment
of reckoning, right?
Where you’re about to go into this
and you talk about it like this moment of reckoning
is sort of a missing link
that people don’t talk about, right?
You call it go to market fit.
So my first question about that
is how many people even recognize
that it is a moment of reckoning like that?
Or did they just kind of,
is it just, you just sort of slide into it
and then you’re either in or not?
You typically slide and fumble your way into it.
Where the light bulb usually goes off
that people feel like, uh-oh,
we may not have figured out
a repeatable go to market model
is you win your first 15, 20 customers,
maybe with founder-led selling
and you say, all right,
we’ve figured out product market fit,
it’s time to grow.
So the board comes in and says, okay,
you figured out product market fit,
it’s time to grow, go do sales.
Go hire VP of sales, go sell.
And so you go hire three or four people,
your burn rate goes up,
you put together some PowerPoint pitches,
and then you wake up six months later
and you went from 20 customers to like 24 or 25.
And your burn rate accelerates
and everybody’s looking at each other,
really stressed out.
And it’s a really scary moment for a company
to sort of say, all right,
we just hit the gas to go grow,
but we didn’t actually really have
our repeatable go to market model figured out.
So that’s usually when the reckoning comes.
– You know, also when that reckoning moment comes,
and I’ve seen this many times,
you’re also, the company is also debating,
is it a sales problem or is it a product problem?
You’re trying to understand,
like maybe the product that I’ve built really isn’t,
doesn’t solve, I love this urgency concept,
doesn’t really satisfy the urgency of the customer.
And so where, what are the levers that you pull
at that particular point in time to self-correct?
Is it a product problem or is it a go to market problem?
Right, and clearly over hiring sales people
and all that are symptoms of something, right?
Maybe you can’t reproduce the founder selling,
product’s great, but I can’t reproduce the selling.
Or the product isn’t hitting the market
or whatever, the only,
and it’s kind of a blended problem at that point in time.
– I mean, how do you start analyzing
and pulling apart the knot before,
presumably before you start building?
– Well, look, all these things are presumably
somewhat self-correctable,
provided that you have enough runway to go self-correct this.
I mean, there’s no substitute for awesome product market fit
and some companies nail it right away
and other companies start in one place
and migrate to another.
The problem is, is if you run out of runway, i.e. cash,
you don’t have time to figure it out.
So one of the elements is that before a company goes
and hires to Bob’s point,
the VP and once you hire a sales VP,
what do they want to go do?
Hire a bunch of reps.
So now you have all this expense
without knowing the urgency
or what’s actually going to work.
When I was CEO, I used this phrase with my team.
I said, we’re not going to expand the sales organization
till we see the whites of their eyes.
And I don’t know if you remember like Bunker Hill, right?
You only had a few bullets to shoot
and you weren’t instructed to not shoot the bullets
until you saw the whites of the eyes coming over the hill.
And it’s some subjectivity here to say,
look, when the customer starts demanding this,
then we’re going to go build a sales organization, right?
Or add the reproducibility.
And I waited for what some people could argue
is too long a time.
But I think we over rotate too soon
to go build up all this capacity
and all this, you know, customer support
and marketing and sales and all this stuff
when there’s no customer ready to actually go buy it.
I mean, what you’re basically saying
is wait until the urgency is painful.
Wait till the, or exactly, wait till you feel it, right?
There’s a really interesting dynamic here,
which I see, you know, and we even felt this,
which was that, hey, you figured out
your first 10 or 15 customers go hire sales.
And that’s sort of the mean that gets out there.
Wait a minute, is that what we really need to do?
And I think one of the mistakes is go hire VBS sales.
That’s what the first thing you need to do when you go sell.
My personal opinion on that is that’s not the right thing to do.
You need to find, like go hire more of like a Davy Crockett
type sales rep that can sell,
but also has a little bit of product and product marketing
in them because really what you’re still trying to do
right there is find your path through the go to market woods
and have it be done by a sales rep
or somebody that’s not the founder.
I think that’s really step one
because that’s the same way you iterate on a product
to find product market fit.
You need to iterate on your go to market and your pitch
and what’s the urgency and what’s the sales model
the same way.
And you need to iterate with those one or two
sort of Davy Crockett type people
that are able to help you find the path.
I mean, I’ve, the sales videos that I’ve done,
we point to this concept called the sales learning curve,
which Mark Leslie developed,
which talks about the renaissance sales rep
in that early phase.
They typically have a combination of technical skills
and sales skills and they can do a lot of things.
They’re kind of like a Swiss army knife of a sales person.
And they ask customers what about a problem right here?
What about a problem right there?
They look a little bit to the left,
they look a little bit to the right.
Figure things out.
You want to hire a couple of those people
or early on to help figure things out.
Okay. So say you have this reckoning and you say,
and you think, okay, shit, I got to figure this out.
What if you have already hired a VP of sales?
Like how do you kind of pause
and then go forward saying, okay,
now we’re going to systematically figure this out?
Maybe the question is,
how could we help avoid the reckoning?
Aren’t you saying it comes inevitably?
No, I don’t think it is.
I think the way to avoid that really painful,
like, oh crap, reckoning is as you shift off founder selling
and iterating on your product,
starting to be thinking your background about,
how do we iterate on go to market?
The same way you iterate on product.
And you’re looking a little bit to the left
or a little bit to the right for the urgency.
You’re trying to figure out like, do you go in bottoms up
or do you come in tops down?
Do you figure out your sales model?
This is something that I got horrendously wrong
as a first time CEO,
is that I thought like having a go to market playbook
essentially meant you have a really good PowerPoint pitch
and some good sales tactics.
And that was horrendously wrong
because your go to market playbook really is paying attention
to how you’re able to find customers,
move them through the buying journey,
what’s working, what’s not working
and how you ultimately get them to decide
and onboard and use your product.
And your early customer wins,
the universe is teaching you a lesson.
So pay really close attention to those first 10 or 15
or 20 wins to not just did you win it or not,
but like, how’d you get there?
What was the journey?
And how can you start to get insight from that
to figure out the repeatability,
really pay attention to what’s the repeatable playbook
and observe and iterate on that.
Then you can avoid that reckoning moment
because you start to see these pieces come together
and you start to see the whites of their eyes.
That’s when you know, okay, it’s time to hit the go button
and shift from sort of Davey Crockett
to like Braveheart or Joan of Arc.
And is that when you know
you’ve found the right go to market fit?
You know when you’re out of this sort of conundrum,
when you actually have reproducibility
from a sales capacity standpoint
or some reproducibility from a pipeline
to conversion standpoint, right?
When you’re out of it phase is
if I hire a salesperson and they cost X
and it takes Y time to generate Z revenue.
And if I can then put literally put on a spreadsheet
and say I’m hiring one rep, two reps, three reps, four reps
and they can reproduce what’s on the spreadsheet,
that’s the reproducible model.
Yeah, now you’re moving, the flywheel is going.
Right, the flywheel is going
and you can really at that point
can start to predict the future, right?
It sounds like you can start to trust a little bit,
like relax and to trust a little bit from that.
There really are those reproducible models
and even if it’s bottoms up
and it’s not hiring somebody,
it may be I have these leads that come in
for a marketing program turns into 100,000 users
and those 100,000 users, 5% of them pay
and that’s the model.
And I convert after three months of use
and so those metrics all have shapes to it, right?
The pipeline has a shape to it on sort of freemium,
sales reps have a shape to it on onboarding
and there are industry standards on all of this
but every company will have its own shape, right?
Yeah, this idea of how do you know you found it
and you’re out of it,
I think is a really profound question.
At the essence of this repeatability
is if you hire somebody new in sales,
do they know what to do?
Like if you have go-to-market fit, you’ve got urgency,
you’ve got your sales model, you’ve got your playbook,
you can hire somebody new in sales,
they kind of know what to do.
You can be like, do this and we win.
It’s like you bring in more people or add more resources,
you kind of know what to do.
And I think that’s really sort of the essence of this test
which is if you have that, I think you’re out of it.
And when you do that, you start to put more into the engine
and you feel that momentum of that repeatable go-to-market
and you go from winning five customers to 10 to 20
to 50, 100 to 500.
What other kinds of metrics are you looking at
to help you define that we’re now out of the woods?
You found this go-to-market fit
and you’re actually hitting real gas
instead of like flooding the engine.
There are measurements that are,
I believe are very important.
One of the key metrics for me is,
how do you know you’re in what we call execution mode,
this kind of rinse and repeat on the sales model?
What I like to look at is that a sales person
is generating greater than three times their loaded cost,
meaning base plus commission.
Let’s say a sales person cost $500,000 a year
or $200,000 a year,
they need to generate a three X multiple on that cost.
And it needs to be across the organization.
You can’t just have one person do it
and it can’t just be the average
because that’s a very misleading indicator.
I could have one sales rep who crushes it
and everyone else does zero.
And if I average that, I would say,
well, yeah, our 10 people are all over the three X metric,
but it happens to be one person.
So I would do it as 70% of the sales organization
need to be generating three X their base cost.
And that’s how you know you’re sort of out of this phase.
And then that’s also a way of knowing
when you should hire more people
because as that number gets greater and greater,
let’s say a sales person can generate five X their cost
or six X their cost, you’re hiring too slowly.
So there’s more deals that that person can hire
and you’re probably leaving things on the table.
So you want to normalize between four to five,
around four X their loaded costs and keep an eye on that.
If it’s too little, you probably have over hired, right?
Where a person only is generating one X
and that’s probably in the early days.
So that’s kind of, that’s a metric that is very important
in terms of, and it’s very simple, right?
Like it’s not this complex like-
Yeah, you can remember that formula.
Yeah, it’s just, and it tends to work reasonably well.
If you think about sort of the end to end sales
and marketing process, do you see as you invest more
in the front end of the pipeline,
you get more leads and more pipeline.
Like as you put X dollars in, you get Y out.
Like is it still linear or even getting better than linear?
Or are you starting to see decreasing marginal returns?
That’s sort of a way to know how hard to push the gas pedal.
When it comes to thinking about hiring reps
or sales engineers, it’s really all about ramp time.
Do your reps reach full productivity in nine months,
12 months, six months or three months?
The moment for me when I knew at Mobile Iron,
we had found good market fit
was when my VPS sales came in and said,
“Hey, I’m willing to take up my quota
“basically as high as you want
“because as long as you let me hire as many reps as I can,
“because I can get them productive in six months
“and I have so many opportunities I can’t get to them.”
He felt like he had a repeatable recipe
to bring new reps on and make them productive
and get them ramped in six months.
That was the point where for me,
like the bit flipped, we were sort of out of the woods.
One of the other elements to look at is pipeline itself.
One of the metrics to be used in the industry
is at the beginning of the quarter,
you wanna have between three and five times
the pipeline to close the quarter, okay?
If you don’t have four times the pipeline
at the beginning of the quarter,
you’re not gonna make your number.
And if you have over at the beginning of the quarter,
the beginning of the year might have been a six, seven, eight,
which means that you’re dropping opportunities on the floor
because the top of the pipeline is fat with opportunities
and you don’t have enough capacity to go and do it, right?
And so looking at that pipeline is also another way
to kind of help modulate how you’re gonna go hire salespeople
to either take up the slack,
meaning get after more opportunities
or don’t hire so many people if the pipeline isn’t there yet.
It sounds like temperature reads almost.
Keeping the metrics very simple
is way more important than having too many metrics
and then you’re trying to measure too many things.
We wanna measure everything, right?
And it gets too complicated
and then you don’t know exactly what to fix.
The fascinating thing that happens
is once you get this repeatable playbook in place
where you find and win customers
and you sort of, people know what needs to be done
at each part of it,
all of a sudden the company now sees
the things they’re working on,
the people in marketing, the people in engineering,
the people in support that are working on these different
things that support the go-to-market playbook,
they now see how what they’re working on
ties to the repeatable go-to-market playbook.
And it was, I didn’t sort of realize this going into this,
but that turned out to be a very powerful sort of
unifying force for the company
to know how what they were working on
tied to how we’re gonna grow the business, right?
And once you understand that,
then you’re out of this sort of mode of,
well, iterating, go-to-market and all that stuff.
And then you can grow from there.
Now, let me point out that if I enter into a new geography
or I build another product as part of the company,
you start over again, let’s say a US geography
and I wanna expand internationally,
maybe my go-to-market model is actually different.
It very well could be.
I might be direct in the US,
but I might go through the channel in Europe.
Exactly.
In which case I have to learn that over again
because I haven’t learned it.
Or I do in partner selling or whatever it might be.
So that’s another point of how do you know you’re out of it?
A company might get into it again
when you build a new product or go into a new geography.
So if we go back to that moment of trying to find
with a Davy Crockett, like feeling your way through the woods
to the right sales model, getting gathering information,
what are some of the questions you’re asking at that point
to find and identify what the right sales model is,
especially if you’re that founder
who doesn’t really know who for,
it is a kind of black box.
Yeah, this is a great question
because there’s all sorts of different types
of sales models you hear about.
And there are certain sales models that are kind of faddish
that get pushed on you.
Like this has been Vogue right now.
Oh, like a freemium sales model is really exciting.
So you should definitely do that.
Or you should follow Atlassian’s model
and have the no sales people product led model.
Like you hear about all these different things
as a founder and a CEO and you’re honestly like,
how do I figure out which ones to do?
So if you sort of think about sales models as a spectrum,
on the far left, you have heavy touch sales led,
which you hire sales reps
to call on customers to do big deals.
In the middle where marketing
does the front end of the sales process,
they find prospects, they drive them to an online eval,
and then you watch the metrics on the online eval
and then an inside sales person calls them
and takes the deal from there.
So it’s like 50/50 marketing sales.
And then on the far right,
you have a product led or zero touch sales model
where there’s no sales people
and literally the customer goes from find to eval
to online to purchase to upsell without a sales rep.
So like in Atlassian or Twilio.
We talked about this on a podcast recently
on the enterprise products about bottoms up growth.
Martin used a metaphor of a slider bar, right?
There’s a slider bar from total organic bottoms up growth
up to like heavy touch.
And where are you, how do you know where you are?
Yeah, and this is something I’ve certainly seen
to the venture capital industry push companies
to sort of the zero touch product led model
because it’s awesome if you can make it work
’cause it’s super capital efficient.
The problem is that it doesn’t work
for all companies and products.
So the most important thing here is to pick the right model
for your product and your customers.
So then how do you do that?
If you pay attention to how your customer buys,
like what is that customer journey look like,
that will lead you to one sales model or another.
For example, you can distill it all down to one question,
which is how does the customer decide to buy your product?
How do you decide to buy?
Not how do they physically purchase it?
It’s how they decide in their mind to say I’m gonna buy.
If the buyer and decider are the same person
and you can reach them with digital marketing,
you can do a product led at Blasian Twilio sales model.
If the product and buyer are sort of two people
that are right next to each other,
like the buyer is the VP of marketing
and the decider is the CEO,
you can do a marketing led sales model
where it’s relatively small number of people involved.
If it’s a committee decision where you’d have the CIO,
the chief security officer,
the VP of infrastructure involved,
it’s really hard to do a marketing led
or product led when you have a committee decision.
As you’re winning those early customers,
pay attention, like watch the cognitive process
inside those customers
for how they’re actually deciding to buy.
I think that’s the biggest clue to wear
on that slider bar you end up.
They’re correlated with big size, small deals,
but I think the essence of it is actually this,
how does the customer make the mental decision to buy?
– I might add one more element in sort of the individual
being the buyer and the decider in one person
versus committee.
I mean, in some ways the product itself
has to be simple enough.
If it’s an individual person,
it has to be easy to understand.
If you have a super complex product
going after the individual,
their head might spin because it’s like,
how do I even think about,
it’s super complicated to use.
It’s complicated to try, complicated to install.
How complex is your product to allow the decider to do it
with whatever vehicle you’re actually explaining
those features, right?
The real exciting element to me is it was always assumed,
oh, enterprise direct sales
because the product is complicated, blah, blah, blah.
And consumer products would be this,
sort of viral uptake decision makers, the buyer.
I think that there is a lot of really interesting
innovation in ease of use for enterprise products
that are now being decided and bought by individuals.
Zoom is a great example.
GitHub is a good example.
Twilio is a good example.
Dropbox is a good example.
There are historical products,
which were super complicated in each of those areas
where you required an army of bought deciders
and an army of salespeople to get something like,
what does this thing do?
And all that stuff and how does it work?
And I think that companies now
who take user interface and design
and simplicity of product in the enterprise
are gonna be big winners.
You can’t just say we’re gonna go to do this,
Atlassian bottoms up model,
but does the product have the elegance
to be able to be sold without a sales organization?
Enterprise companies actually are looking
a little bit more like consumer companies
when it comes to product design,
fit and finish and all of that,
which before, it was like,
hey, like if I had a command line interface,
that’s enough with a thousand page user manual.
I think this is where this sort of go-to-market fit
and all these other linking go-to-market
and product come together.
It used to be that product was sort of over here
and did product stuff and sales is over here,
did sales stuff and was product management’s job
to figure out the middle.
What’s really neat about this is you will start
to see iterations between how does the go-to-market
put requirements on the product
and then how does the product influence the go-to-market?
There’s an iterative loop between those now
that I think is actually in many ways
sort of changing almost the cultures
of how enterprise products get built.
– I agree.
– Okay, so you mentioned this very specific moment
when you know your metrics, your product is dialed in,
you have a repeatable go-to-market strategy,
pick the right business model.
What are some of the like, whoops, don’t step in that.
Like, okay, I got it good.
Don’t do this moment.
The biggest pitfalls basically that you can come to.
– Yeah, so in the beginning of building a startup,
your mission is just don’t die.
(laughs)
It really is, just live to fight another day.
When you find go-to-market fit
and you start to feel that momentum, the world changes.
You shift from this, how do we not die mode to,
oh crap, how do we win?
And you’ve really entered a different mindset.
Once a company makes this shift from how do we not die
and how do we win, all hell breaks loose.
And at this point, your mission becomes,
how do we now accelerate the business
to become a category leader?
So you have to go from being sort of ruthlessly frugal,
pinching every penny and counting every nickel
to almost like calculated recklessness.
We’re gonna try some things
and spend some money on things and hire some people,
even though you’re not sure it’s totally gonna work.
And that’s a hard mindset shift for founders.
The second thing that changes is the company culture,
which is that usually up until this point,
you’ve been a very product-led culture
and that’s part of what has made the company successful.
But now as part of accelerating the category leader,
the company needs to have a balanced culture
between valuing both product and go-to-market
as equal citizens in the culture.
And those kind of culture shifts are actually hard for teams.
It’s a journey.
And this manifests in all sorts of ways like just hiring.
All of a sudden, recruiting becomes a core competency
for the company, finding talent becomes a core competency.
Managers are now evaluated
for how well they can hit hiring targets,
’cause that’s the biggest thing
that’s gonna get in your way of execution.
And then how do you actually onboard all these people
and make them effective and part of the culture?
‘Cause what actually happens at this point
is you can end up fracturing the culture of the company.
And in many ways, sort of committing hairy carry
by growing too fast
without actually onboarding people effectively.
– At that point, one of the key attributes of one of the key,
it’s not the only one attributes
being a great CEO and great leader
is hiring and retaining a world-class management team.
– That is exactly right.
– What I see is sub-optimizations made
are just not having enough pattern matching skills
to actually go recruit the right people for the right roles.
And I think that that then results in sub-optimal executives
kind of not all being great at what they do.
And then you run into problems that way
because scaling the organization
is about having reproducibility and being able to hire people,
being able to build processes into the organization.
And if the executive team can handle it,
they’re not capable of scaling, you run into a lot of problems.
– Yeah, I think that’s exactly right.
I mean, for me, I was the first time CEO in 2008.
And my job changed profoundly.
It was more like from Captain America
and sort of the platoon in the woods
to more like Captain America and the Avengers,
where you had to go hire your band of Avengers
where each one of your executives
has to have a special superpower
that’s better than you are at that job.
– Or that you did not have.
You have the self-knowledge to know you didn’t have.
– So in many ways, this hiring the leadership team
that Peter’s talking about is a tough transition
for the CEO because the CEO has to let go
of things that he or she was previously doing
that they may think are important and are scared of.
It’s also sort of create some insecurity
because all of a sudden you hire these people
who are grade A executives that join.
And the first thing they’re gonna do
is basically look at all the things you’ve been working on
and basically look at how screwed up they are
and their job is to fix them.
It creates this weird feeling of sort of insecurity
calling your baby ugly.
But I mean, if you hire a grade A VP of sales,
they’re gonna absolutely push you
and the rest of the organization
as they try and drive to scale.
And it’s gonna be uncomfortable.
And if it’s not, you may have not hired the right person.
– So it sounds to me like so much of what you’re describing
is about this ability to kind of look around you
and notice what’s, learn from it and then shift mindsets
or mechanisms or plans for the future based on that.
So it’s kind of about flexibility, right?
How do you stay in that mode as the company grows
and evolves and you are constantly being forced
to sort of examine and then shift?
– I think self-awareness is incredibly important
because you constantly need to be reflecting about
what are I and what are we doing well and not well
and what do we need to get better at?
We spend so much time learning
and in many ways the very things that make us successful
in getting from A to B, for instance,
getting through the survival phase of the company,
many of those same things actually now get in the way
or could kill you at the next stage.
So in addition to learning what you need to do next
and how to be a leader at the next stage of the company,
there needs to be a very conscious effort
to look in the mirror and perhaps unlearn
some of the things that got you there.
– I often describe running a company at different phases
and your ability to turn the ship
kind of like a rowboat versus a ship.
When you’re a small company
and you’re like in this little rowboat
and one big wave can sink you,
you can use the oars and turn the thing on a dime.
And then your boat gets bigger and bigger and bigger
and it’s way harder to turn
and think about a big company,
they’re like a freaking cruise ship, right?
And to turn that thing,
you have to start two miles ahead to turn it.
So what does that mean in terms of running a company?
To me, the horizon by which you look at as a CEO
gets farther and farther out in terms of planning,
right?
Like, if your company is reasonable size,
there’s almost nothing you can do this quarter
to change the outcome of this quarter.
You’re not gonna, like,
maybe you can help with a sales deal or whatever.
It’s probably like,
what can I do now to impact next year?
If you’re real small,
what I do today can impact tomorrow.
There’s always new projects and new things
that are the little boats that may surround the big boat,
you know, in which case you can do things much more nimbly.
If it’s the big thing,
it’s hard to go and change on a dime
when things are generally going in some direction, right?
CEOs and this whole self-awareness should be aware
of kind of the time horizon by which I’m operating at
and where my influence can most adequately be impacted
given that horizon.
– And when you need to pull out your telescope, basically.
– That’s wonderful.
Thanks so much for joining us on the A16Z podcast.
– My pleasure, our pleasure.
Thanks, Bob.
– Thanks.
with Peter Levine, Bob Tinker, and Hanne Tidnam (@omnivorousread)
For consumer companies, often when the holy grail of product-market fit is achieved, the company takes off: magic happens, growth unlocks. Enterprise B2B companies face a different challenge. Sometimes, despite achieving product-market fit (and knowing when you’ve achieved it) and winning your first cohorts of renewing customers — growth remains a challenge. Industry analyst maps are riddled with the logos of enterprise B2B companies who built outstanding products, won outstanding initial sets of customers… and then ultimately failed to scale.
In this episode of the a16z Podcast, Bob Tinker, author of the book Survival to Thrival and founding CEO of MobileIron, and a16z general partner Peter Levine, talk with Hanne Tidnam all about how to find the right go-to-market fit for the enterprise startup. How do founders avoid that moment of reckoning after product-market fit, but before growth? When should an enterprise startup accelerate sales investments? — the ”Goldilocks problem” (not too early, not too late!) — and pick the right sales team and go-to-market model for their product and their customers? And if you’re stuck in that moment where growth stalls, what are the right tools to get out of it? What are the important metrics to know both where you are, and when you’re out of the woods?
