A VC view on Enterprise Sales

A VC view on Enterprise Sales

• 1.
  Confidential & Proprietary– Do Not DuplicateJanuary 6, 2020 A VC View on Enterprise Sales Sixteen sales lessons from the field
• 2.
  Confidential & Proprietary– Do Not Duplicate 2 c 15 years backing enterprise tech in Europe & Israel 2
• 3.
  Confidential & Proprietary– Do Not Duplicate 3 c How we invest 3 Where we have invested recently: Who has invested with us: Stage & Style: Day Zero Early Scaling First Check Series A Pre-Revenue Early Sales $250K $1.5M Prefer to lead (but ok to follow) Prefer to take a board seat (but not always) “hands-on advisors to founder-led companies”
• 4.
  Confidential & Proprietary– Do Not Duplicate 4 My personal sales journey: volume 4 4 years 1.2M kilometers flown ~600 actively engaged 1,395 prospects ~300 first meetings or calls $41M raised
• 5.
  Confidential & Proprietary– Do Not Duplicate 5 My personal sales journey: value 5 Angular Ventures: Distribution of LP Commitments 59 LPs in total; 28 of meaningful size Largest LP is 40x the smallest LP One LP took a twenty-minute meeting Another LP took 3 years
• 6.
  Confidential & Proprietary– Do Not Duplicate 6 “Enterprise” vs. “Deep Tech” 6
• 7.
  Confidential & Proprietary– Do Not Duplicate 7 Lesson #1: You are either post-PMF or pre-PMF 7 Seeking product market fit Founder-led sales Experimentation & learning “Product- Market Fit” “Natural” repeatable, scalableUn-natural sales
• 8.
  Confidential & Proprietary– Do Not Duplicate 8 Lesson #2: Embrace the chaos 8 Theory of Marketing & Sales Funnel Reality of Founder-led Sales vs.
• 9.
  Confidential & Proprietary– Do Not Duplicate 9 Lesson #3: Work your way backwards up the funnel 9 Leads move down through the sales funnel In general, try to build capability up from the “bottom” of the funnel to the top
• 10.
  Confidential & Proprietary– Do Not Duplicate 10 Lesson #4: Process and tools help; invest in them early • Tools can be very helpful in managing the chaos • Invest in tools and processes wherever you can • Customize them to your needs 10
• 11.
  Confidential & Proprietary– Do Not Duplicate 11 Lesson #5: The “cavalry” will not save you 11 Don’t fall for the seductive idea that “experienced” “American” “sales professionals” will accelerate your early- stage startups growth plan Why not? • They lack startup DNA • Intercultural challenges • Very expensive • Accustomed to support you can’t provide • Motivated by cash, not equity (here to make money, not to help you learn) • Why are they talking to YOU?
• 12.
  Confidential & Proprietary– Do Not Duplicate 12 Lesson #6: Your pricing is probably wrong 12 • Understand the options • Per seat • Per customer/site • Volume-based • Value-based • Open source/freemium • Trials • Ask your customers • Think about TCO and ROI • Don’t be afraid to experiment • Raise your prices
• 13.
  Confidential & Proprietary– Do Not Duplicate 13 Lesson #7: Sometimes $1M is as easy/hard as $50K 13 • Don’t be afraid to go after big deals– as long as they are not too big/slow/complex/unique • Don’t be afraid to raise prices– as long as you are charging for the right thing • Early validation is great, but there are no points for “penetration pricing”
• 14.
  Confidential & Proprietary– Do Not Duplicate 14 Lesson #8: Your ARPA is your destiny… 14 Source: Nathan Latka Source: Christoph Janz (Point Nine)
• 15.
  Confidential & Proprietary– Do Not Duplicate 15 Lesson #9: …because unit economics are everything 15 By customer By sales resources For you For them • How will accounts behave over time in terms of churn and expansion? • What are gross margins over time? • Can you measure account quality and profitability? • Can we predict account behavior? • Are your assumptions around the costs of sales resources, account execs, success/support, and marketing expenses reasonable? • What is the fully-loaded cost of sales and marketing per account? • Can we predict sales resource performance? • Is our pricing right? • What is the ROI for a customer? • Based on real TCO and proposed pricing • Should be 10x+ • What is the time to value? • Does it make economic sense for a salesperson to work for the company? • Do we have the right compensation plan? • How easy will it be for them to hit their OTE?
• 16.
  Confidential & Proprietary– Do Not Duplicate 16 Lesson #10 Accept your role as Salesperson-in-Chief 16 • CEOs/founders are always selling (product, roles, equity) • Ability to sell = ability to survive • If you can’t sell the product yourself, how can you hire someone to do that? • This is a massive learning opportunity for the company, and a massive growth opportunity for you
• 17.
  Confidential & Proprietary– Do Not Duplicate 17 Lesson #11: Discover the Buying (Selling) Process 17 • How do customers buy your product? • Are there identifiable segments? • Identify gateways, catalysts, personas, blockers, obstacles… • What can you do to impact this process? • Be thoughtful about where to be original and where to copy others
• 18.
  Confidential & Proprietary– Do Not Duplicate 18 Lesson #12: The “four V’s” of revenue quality 18 Volume (how many customers?) Value (how much could they pay?) Validation (who is buying and why?) Velocity (how fast is it growing?)
• 19.
  Confidential & Proprietary– Do Not Duplicate 19 Lesson #13: Not all revenue created equal 19 License Recurring LicenseProf. Services Recurring license with 12-month commitment Recurring license with 36-month commitment; 10% discount Recurring license with 36-month commitment; 20% discount; cash up front
• 20.
  Confidential & Proprietary– Do Not Duplicate 20 Lesson #14: Repeatability > Revenue 20 • Smart investors will back a great founder + clear vision • Opportunity matters more than current revenue • Repeatability is a predictor of growth • Your activities are designed to de-risk the risks that matter
• 21.
  Confidential & Proprietary– Do Not Duplicate 21 Lesson #15: Sales-driven product 21 • If your VP Sales were in charge of product, what would she change? • Are you incorporating learnings from the field into product design? Feature prioritization? Pricing? • Where are the friction points and can you eliminate them? (onboarding? configuration? adoption?)
• 22.
  Confidential & Proprietary– Do Not Duplicate 22 Lesson #16: Your “Series A” story will be about sales 22 Purpose Problem Why now Solution Market Size pitch template has 10 suggested sections: Competition Product Team Business Model Financials By the Series A stage, this can be framed in customer-facing terms Providing examples of problems from actual customers demonstrates knowledge and opportunity Show time to value, actual ROI, customer quotes, price, and willingness to pay The efficiency of your sales cycle and the velocity of sales growth help prove this point Again, the velocity of sales and the price point you have achieved helps prove this point Credible reference customers will have evaluated your competitors, and their decision to go with a startup proves a lot All the other elements on this page will combine to prove that you have the right product Given that you have real customers paying a real price on a real pricing model, your business model will already be in sharper focus VCs will judge two aspects: (1) ability to succeed without professional sales force and (2) ability to grow/recruit a sales force Ultimately, the whole “financial” discussion is about $XM in financing to raise ARR to given level and further prove sales scalability
• 23.
  Confidential & Proprietary– Do Not Duplicate 23 Thank you & good luck!