Category Archives: SaaS

Official Video of my SaaStr Europa Presentation

Just a quick post to highlight that SaaStr has posted the official video of my SaaStr Europa 2022 presentation entitled, The Top 5 Scale-Up Mistakes, that I gave in Barcelona in June.  They also published a blog on the session and packaged it into a podcast episode.

The video includes a 30-minute delivery of the presentation followed by a open-mike Q&A for another 30 minutes.  Note that I’ve since re-recorded the presentation into a slightly more relaxed 45-minute delivery that is posted on the Balderton Build site.

So, if you want the live version with Q&A, watch this.  If you want the studio version, here it is on the Balderton site.

Thanks to everyone who attended and thanks to SaaStr for having me.

Practical Thoughts on Branding for Software Startups

Who are we?  What does our brand stand for?  What promise does our brand make?  These are some of the questions that quickly come up when thinking about branding.

In general, I think branding is a potential marketing rathole for startups, particularly early-stage ones.  See my post entitled, If Rebranding’s The Answer What Was The Question?

Do want to build a brand?  Go sell some software.  Want to improve your brand perception?  Go sell some software.  Want to have a distinctive brand visual territory?  Go sell some software.  You see the pattern.

Some startups put the cart in front of the horse.  Don’t do that.  Found a company.  Create a product.  Get product-market fit (PMF), i.e., determine some problem you solve for some person with some product.

You don’t need a brand before you have PMF.  Go get PMF.  Go sell some software to prove there’s a market.  Then you can start thinking about branding.  Then people start to wonder about some of those brand-y questions, like who are you and what do you stand for?

In this post, I’ll use a six-point branding framework and share my thoughts on how each element applies (or doesn’t) to startups. After that, I’ll discuss some important brand concepts that don’t explicitly fit in the framwork.

Our framework contains the following elements, which I’ve re-ordered according to their importance to startups:

  • Brand targeting
  • Brand promise
  • Brand positioning
  • Brand identity
  • Brand values
  • Brand voice

Let’s share some quick thoughts on each.

Brand Targeting (Who Do We Sell To?)
This is brandspeak for figuring out who you’re selling to.  Back when I went to b-school, they taught the acronym STP (segment, target, position), which I’ve always liked both for its simplicity and its explicit order:

  • Figure out a mechanism to segment the market — e.g., by company size, by vertical industry, by adjacent systems
  • Target one or more of those segments.  For startups, fewer is better.
  • Position your product to those target segments.

As I’ve always said, the first step in building any presentation is to think about the audience.  If we don’t know who we’re selling to, we don’t know what to say.  For startups, determing the target is an important part of PMF (the person part of person/problem/product), so figuring it out will require some degree of  experimentation (aka, spaghetti throwing or emergent strategy).

Brand Promise (Why Do They Buy From Our Company?)
This is brandspeak for the high-level expression of why someone should buy from your company, often more simply known as the value proposition.  For tech startups they tend to fall into a few patterns.  (I’ll use my semi-informed perception of next-gen EPM vendors as an example.)

  • We are you.  By FP&A for FP&A (e.g., Mosaic, we built it for ourselves at Palantir).
  • We fixed it.  We took the last-generation leader and made it better (e.g., Cube to Adaptive, Pigment to Anaplan)
  • We rebuilt it.  We run on the modern stack with modern technology (e.g., OnPlan to Vena)
  • We verticalized it (e.g., Plannuh for marketing, Place for SaaS)

This is not product positioning; we cover that next.  This is a high-level, one-line statement about why to do business with your company.  Other examples:

  • Skyflow:  what if privacy had an API?
  • Hex:  a modern platform for data science
  • Cyral:  the last line of defense for data

Brand Positioning (Why Do They Buy Our Product?)
This is product positioning.  Many people start with the Geoffrey Moore positioning template, but I think that’s a bit heavy and includes things other than strictly positioning (e.g., targeting).  Ultimately, positioning comes down to answering one of two questions:

  • Why buy one?  (Benefit oriented.)
  • Why buy yours?  (Differentiation oriented.)

Startups who are alone in defining their category need to focus on the first question.  Those in crowded categories (either a new market with several nascent entrants or a more developed category with the usual suspects), the emphasis needs to be on why buy mine.

Some early-stage startups actually need to focus on both, ending up with a dreaded two-phase sales cycle:  first convince the customer to buy one, and then the customer starts a formal evaluation process where you need to convince them to buy yours.  (Try to avoid this by selling to business leaders who can pull the trigger at the end of the first cycle.)

The Brandier Part of the Framework
This is the point in the framework where we go from commonsense startup strategy (with more brand-y naming conventions) to the world of pure branding.  Spending too much energy down here, below this line, can waste valuable time and energy.  Let’s understand what these three elements mean and think about how much to invest in them.  We’ll then conclude the post by talking about some important brand concepts that didn’t explicitly make this six-part framwork.

Brand Identity (Do We Look Like Us?)
This is the world of visual identity — e.g., color palette, logo, fonts, imagery.  This answers the question:  do we look like us?  This is important, but it’s table stakes.  You’ll never win deals by having a better visual identity than another startup, but you might well lose them if you’re seen as unprofessional, cheap, or rinky-dink.  Invest enough to look good and keep up with the Joneses.  But not a penny more.

Brand Values (What Do We Stand For?)
This answers the question:  what do we stand for?  For startups, it’s largely about the company’s culture and values.  While both are often quite important for culture-building and recruiting, for customer buying decisions, well, not so much.  Make an about-us page, tell your origin story, share your mission, and list your values.  From a company-building point of view, the key thing (and the hard part) is living and reinforcing those values.  From a marketing point of view, you’re done.

Brand Voice (Do We Sound Like Us?)
This is the world of tone, and answers the question:  do we sound like us?  For consumer brands, voice matters a lot.  For tech startups, particularly those in enterprise, well, I hate to say it but everyone pretty much sounds the same.  We hire the same agencies, the same copywriters, the same product marketers as everyone else.  So this become table stakes once again:  invest enough to sound like everybody else and let what you’re saying, not how you’re saying it, be the differentiator.

Only one enterprise software company I can think of had a distinctive voice:  Splunk.  It was largely executed through clever slogans like, “finding your faults, just like your mother.”  While I’m sure their marketing team had fun with this, they did it on the side, after doing all the core marketing required to build a great business.  Don’t invert that prioritization.  The easiest way avoid problems is to put zero effort on differentiation via voice.

Other Important Brand Concepts
There are two important brand concepts that aren’t in the framework explicitly, so I want to talk about them here:  brand awarenes and brand perception.

Brand awareness (“What percent have heard of us?”)
Every CMO who has ever heard, “we’re the best-kept secret in the market” from their salesforce or, “you’re a hidden gem,” from your customer base will feel my pain here.

Awareness comes in two basic flavors (i.e., aided, unaided) and there are only two things I know about it:

  • You can never have enough to make everyone happy.  Ever.  Someone will always have an opinion.
  • You absolutely have to measure it.  The only way to fight subjective perception is with data.  So measure it.

In tech, aided awareness is more important than unaided (which is simply a very high bar) and, since larger vendor compete in multiple categories, you must measure awareness within a category.  Don’t ask:  “have you heard of Oracle?”  Ask:  “In the context of CRM tools, have you heard of Oracle?”

In fact, if you’re measuring awareness, don’t stop there.  Ask these whole-funnel questions — about both you and your key competitors — as well:

  • Have you heard of X?
  • Do you have a positive opinion of X?
  • Have you considered buying X?
  • Have you tried X?
  • Have you purchased X?
  • Have you repurchased X?

And then compare what this outside-in research tells you compared to the conversion rates in your CRM funnel.  You might find you’re guilty of navel-gazing.

Brand perceptions (“What do they think of us?”)
In software, once brand awareness is established, three brand perceptions are critical:

  • Market leadership — are we seen as a market leader?  That is, as the safe choice in the market.  This is critical to risk-averse individual buyers and mistake-averse evaluation committees.
  • Thought leadership — are we seen as a thought leader?  A market leader who lacks thought leadership may hold a temporary position atop the market.  The safest purchase has both.  Lack of thought leadership opens attack vectors for new entrants.
  • Technology leader — are we seen as a technology leader?  Strictly speaking leadership is not required, but fast-following is.  Most buyers don’t need you to invent everything — many market leaders, from Oracle to Microsoft to Salesforce — are more fast-followers than leaders — but they do need to believe you are in-touch and evolving.  Tech laggards (e.g., SAP) become targets for replacement.

For more of my thoughts on branding, see my posts on Branded Features, If Branding’s the Answer what was the Question, and The Market Leader Play.

Branding’s fun.  If want to work full time on it, go to a top agency.  If you want it to be a big part of your marketing, work in consumer products as a brand manager.  In tech, well, learn about branding from the best, and then apply it delicately and where needed.

SaaStr Europa Slides: The Top 5 Mistakes in Scale-Up

Just a quick post to publish the slides from the talk I gave today at SaaStr Europa in Barcelona on the top 5 mistakes in scale-up.  Thanks so much to everyone who attended, stuck around for the AMA session afterwards, and gave me feedback or asked me questions at the conference.

If you have trouble accessing these, please let me know and I can try to switch file sharing platforms.  I like Slideshare for the embed capability, but I’m told they now paywall off my stuff and I haven’t fully researched how and if I can fix that.  Leave a comment if you have troubles so I’ll know to go look.

Here are the slides:

 

The Qualified Sales Leader: A Must-Read Book for Product-Oriented Founders

There’s something in the Boston water that’s great for enterprise sales.

A decade ago the phenoms were the Murphy Brothers, the Flying Wallendas of enterprise sales, not two, three, four, or five — but six brothers (Tom, Frank, Dan, Jeff, Joe and Bob) all of whom ended up with big careers in enterprise sales.

Today’s phenom is John McMahon, widely recognized as the only person ever to have been the CRO at five public, enterprise software companies (PTC, Geo-Tel, Ariba, BladeLogic, and BMC).

Yes, you saw PTC in there.  Back in the day it was the Xerox sales mafia that commanded great respect in enterprise sales.  For the past two decades, it’s been the PTC mafia in that esteemed position.  Even A16z tapped into that mafia via operating partner Mark Cranney, who brought the PTC wisdom and magic to interested portfolio companies.

I’ve always felt the sales greats, the people who invent and build new methodologies, rarely come out of the always-clear market leaders like Salesforce or Oracle.  They come out of places like Xerox, PTC, and Knowledgeware.  (Remember, the subtitle of Solution Selling is “creating buyers in difficult selling markets.”)  Adversity, in the form of competitive markets or complex products, makes the sales methodology stronger.

People aside, PTC is famous in sales circles for being the birthplace of MEDDICC, what some would call a “sales methodology,” and others simply “an acronym,” and which is officially called a “sales qualification framework.”  The somewhat counter-intuitive acronym stands for Metrics, Economic buyer, Decision criteria, Decision process, Implicate pain, Champion, and Competition.

So this is where John McMahon, the author of The Qualified Sales Leader, comes from and in this post I’ll do a brief review of his book.  I’ll start with the conclusion:  this is a must-read book for the product-oriented founder of any enterprise software startup.  Better yet, you don’t even have to read the whole book.  The book is broken into a series of short chapters and I think every product-oriented founder should ideally read chapters 1 through 28 (about half the book) and at absolute bare minimum chapters 1 through 17.

Why do I say this?

  • It’s an easy read.  Like many business books these days, it teaches a lot through storytelling.
  • It paints a super clear picture.  My neck almost literally started to hurt from nodding so many times as I read parts I and II of the book.
  • It paints a bit that will be all too familiar to many startup founder/CEOs.  Thin pipeline.  Missing forecasts.  Slipping deals.  Grumpy salespeople.   Lack of standard vocabulary and process.
  • It explains what’s going on and how to fix it.  Frankly, I never read something that so clearly describes the world of many startups, explains what’s going and why it’s happening and then walks through a way to fix it.

If you’re in sales or sales management, then by all means, read the whole book.  To me, somewhere chapter 28 it flips from what I’d say it the high-level and conceptual to the heavily applied — e.g., how to find a champion, how to test a champion, etc.

I’m not in love with the forecasting strategy part of the book near the end — it felt a bit out of place — because I greatly prefer triangulation forecasts and probabilistic forecasting to anything else I’ve tried.

But overall this is a great book, for the sales practitioner, the sales manager and, for my purposes and more importantly, for the product-oriented founder and general startup executive who wants a ringside seat to understand what typically goes wrong in an enterprise sales organization and how to fix it.

 

Talking Burn: Appearance on the Metric Stack Podcast on Cash Conversion Score and Related Metrics

It was a combination of luck and foresight that I started talking with Allan Wille and Lauren Thibodeau about capital efficiency as a potential topic for their Metric Stack podcast many months ago.  Because now, as the episode is coming out, capital efficiency is the hot topic of the day.  Good luck (if not for a bad reason), but I’ll take it.

Here are some of the things we discussed on the podcast:

  • If you think of startups as organisms that convert venture capital (VC) into ARR, then we need some metric for how efficiently they do that.
  • Bessemer’s cash conversion score (CCS) is one such metric
  • I believe Bessemer defines CCS upside-down; I find it more intuitive to use capital consumed as the numerator and ARR (to show for it) in the denominator — as you would do with a CAC ratio.
  • Using my formula (= 1/CCS) for aggregate burn, here are some benchmarks showing the correlation between investment IRR and CCS within Bessemer’s portfolio
  • < 1 is amazing (i.e., burning <$50M to get to $50M in ARR)
  • 1-2 is good (i.e., burning $50M to $100M to get to $50M)
  • 2-4 is questionable (i.e., burning $100M to $200M to get to $50M)
  • 4+ is bad (i.e., burning $200M+ to get to $50M)
  • On IRR, Bessemer companies with a ratio of <1x had an IRR of 120%, 1-2 had an IRR of 80%, and 2-4 had an IRR of 40%.
  • At some point, I’d somewhat tongue-in-cheekily defined a metric called hype factor on the theory that startup organisms actually produced two things:  ARR and hype.
  • The impact of strategy pivots on overall capital efficiency, what that can mean for future funding, and how that sometimes leads to recapitalizations and pay-to-play financing rounds

The episode is available on AppleSpotify, and YouTube.  Enjoy it!  And watch that burn!