A16Z Podcasts on Go-to-Market and Product-Market-Sales Fit

I recently listened to some great podcasts from A16Z with experts discussing enterprise sales. I took notes and felt it would be helpful to share these with the world.

Source Podcasts

These notes are a compilation of these 3 podcasts:

  1. Jan 29, 2019 – Finding Go-to-Market Fit in the Enterprise
  2. Jan 30, 2019 – Stories and Lessons in Enterprise Sales
  3. Feb 2, 2019 – Product-Market-Sales Fit

Product-Market-Sales Fit

  • Repeatable steps/model to find and win customers over and over and over.
    • Figure out where your product fits. What problem does it solve? Is this an urgent problem? How is your solution unique?
    • You can talk to people in different sized companies to hear what fits.
    • Features of the product need to inherit the right fit for who’s buying this product.
    • Your solution needs to be 10x better than existing vendors. If new problem, the problem must be clear and there.
  • Founder Selling is a great start, but you need to figure out how to find and win customers without the founder.
    • Founder-led selling starts at Day 0. Founders need to start selling to their significant others, their friends and family, the initial people they hire… The selling will then move onto generating revenue and will continue forever.
  • How does the customer decide to buy? One person or a committee? How complicated/easy is your product?
    • This all impacts the GTM model and where you invest in the company
    • If being used by a single user, then can do bottom up selling.
    • Top down works if it touches multiple departments.
    • Sandwich Strategy – Can do both if you have a trial to start at the bottom and then shift to evangelize into different teams. Land and Expand strategy. 
  • Company Growth
    • $0-$1M ARR: Find Product-Market fit. Trying to figure out if anyone will buy this.
    • $1M-$10M: Find Product-Market-Sales fit. GTM strategy and aligning to customer need.
    • $10M-$75M: Scale the sales org. Hit the gas and build the company.
    • $75M+: Build product #2
  • “Hit the gas” must first have a repeatable GTM model.
    • You want to avoid the situation where you hire a bunch of sales reps who say, “Hurry up! But what do I do next?”
  • Services Matter
    • User adoption counts in GTM Fit
      • If users don’t adopt then they won’t renew. New customers cost more to acquire than retaining existing customers.
    • Services reduce the margin for you as a vendor.
    • However, some customers will want more high-touch service.
    • If no services, there’s a touch that the customer won’t get high adoption.
    • It’s also possible that including services in a PO might drive a larger deal overall. Blended margin. Services could be a leader to drive higher deals.
  • Once we have a clear GTM, then other parts of the company see how they can contribute to the GTM to help the company win
    • Iterate on the GTM: Finding customers, Buying journey, Urgency that’s driving their decision, How does the customer decide?, Onboarding customers, Renewing/upselling customers.
    • Rowboat is small and very easy to turn. A big company is like a cruise ship and takes much longer to turn. A big company is alike a cruise ship. As a CEO, of a big company your horizon needs to be longer and longer. It’s much harder to impact the company this quarter.

Product Iteration

  • Start with customer feedback
  • Respond to competitive pressures
  • Expand the product suite with a 1/3 and 2/3 split for R&D
    • 2/3 in existing product – keep iterating and improving
    • 1/3 in new product expansion – expand into new markets
    • What’s new soon becomes part of the mature product and migrates into the 2/3 of R&D
  • Consider acquisitions to expand R&D
    • Can help shorten the time to market for new products
    • Can also introduce complexity
  • When new products launch in a company, the old organization may not be capable of selling this product effectively. (Or they may just fall back onto old habits and not sell the new product.)
    • Can get around with with new team, aka “Startups within a Startup”
    • Let this new team figure out the GTM model and blaze a new trail
    • Then train the broader sales team to sell this new product
    • Consider a new comp plan for this selling team
    • Have the managers make a big deal about selling the new product. Have this come from the CEO all the way down.
    • Will also need some internal selling to convince people why the existing team should be motivated by this.
    • But don’t create too many products too quickly. This will spread the sales team too thin.
  • Sales Learning Curve
    • 0-25 customers: Figuring it out. Let the PM team lead by “Founder Selling”
    • 25-100 customers: Maturation phase. Get some sales reps involved
    • 100+ customers: Execution phase
  • Pricing and Packing
    • What is the value of your product? Is this a $2K or a $200K problem?
      • Can look at competition.
      • Charge more than you think. Customers often like to pay for value.
      • Help the customer feel like the price is fair.
      • Articulation of the high price is largely driven by the Sales Org to promote the product.
    • Simple pricing. Explain this in 1 sentence.
    • Measure impact of the software pre-sale and post-sale.
    • You can always discount pricing but hard to go higher.
    • Price based on the unit of measure that your customers understand. Be careful with introducing a brand new pricing mechanism because they may just confuse buyers and add friction to the deal.
    • Can justify a premium price if you have numbers to justify the price.
  • Product Mangers
    • Try to find a PM who can understand the end users very well.
    • This will help them build empathy with the buyer and understand if the product is working.
    • Skills: empathy to define the product, business aspects to figure out positions/pricing, execution to build, deliver and adopt the product and scale the product
  • Marketing
    • Product, Price, Promotion, Place

Sales reps and hiring

  • Early on, you should hire reps who are more like a Swiss army knife. They will listen to the customers and help shape the product and GTM.
  • Sales Rep onboarding can take up to 6 months
    • Hire, Train, Win over and over
    • Do new reps know what to do to win?
    • 70% of reps should generate revenue of 3x their cost
    • Build a culture of success where 70% of people will succeed
  • Current OTE for reps in Silicon Valley is ~$300K (1/2 base, 1/2 quota)
  • Sales plans should be simple. Put it on a 3×5 index card.
  • Compensate reps on what’s most important to the company. If it’s ARR, then make that the single most important metric.
  • Be careful about not getting too distracted with new products, metrics, etc.
  • If concerned about holes in a comp plan or unintended consequences, you can poll your top reps to poke holes in the plan. Reward them for this!

Trust

  • Trust is paramount inside and outside the company.
  • Be honest about what’s working and not working.
  • Trust is like a “bank of trust”. You make deposits into the bank and can take a withdrawal when you need it. But there are no loans, you much first put in the deposits.
  • Culture is all about what you do when things go bad.