Byron Deeter is not backing down from his optimism about the cloud and the end of the COVID-19-induced wave of software buying doesn’t have him too worried.
Of course, Deeter is an investor at Bessemer, a venture capital concern that has done well betting on the cloud, so you might expect him to stay a cloud bull. But during a recent chat with TechCrunch as part of our Extra Crunch Live series, his answer was worth re-reading.
The Extra Crunch Live series continues: Click this to see what’s coming up on the agenda.
We asked the about what might happen once the newly announced vaccines arrive and the pandemic-led digital transformation acceleration loses its tailwind.
“Will that growth decelerate? [Or] was it a point-in-time moment for COVID? Or has this been a pulling forward of overall trends? Certainly, you’re going to have both,” he said, adding that he doesn’t “think in a year from now, we’re going to be spending 10 hours a day on Zooms,” but that in his view Zoom will remain “foundational in the economy.”
In Deeter’s view, “we’ve just set a new baseline [for software] and the beauty of these subscription businesses is that they’re not going to turn them off.” The result of all of that? Bullish growth expectations.
Drilling in further, we asked if he expects Bessemer software portfolio companies will grow faster in percentage terms in 2021 than they did in 2020. Saying that the cohort profile will change, he added that “on balance,” he thinks that “there’s a real case that [the group] could grow the same or faster.”
That knocked us on our ass a bit. How could that be the case when the strongest tailwind that software has enjoyed since the iPhone and the internet dies down? Some software companies got pulled forward by COVID-19 Deeter said, the Slacks and Zooms and DocuSigns. But there are also products where companies that “did urgent departmental rollouts” of new tooling in response to pandemic-led changes to their business operations that Deeter jokingly called “duct tape and chewing gum solutions.”
Those companies are not going back to legacy software, in his view. A lack of retrenchment would drive modern software usage, we reckon, and thus more spend. That’s growth for the startup software cohort. “As long as the economy holds, ” Deeter said in closing, the “general buying patterns hold.”
That’s bullish as heck for a lot of startups.
But our chat covered a lot more. We dug into what sort of pitch decks he likes to read, and what he looks for in founders. Hell, we even asked Deeter what his pan-advice would be to entrepreneurs at the end. We also got to ask a few audience questions, so a big thanks to everyone who sent them in live.
The full video from the show is down below, along with a few more quotes. Head here if you need Extra Crunch access, and please enjoy the show.
Byron + Extra Crunch Live
On bottom-up sales strategy versus assisted sales:
It is a real dilemma knowing what to focus on. What’s your ideal customer profile? What’s your core go-to-market motion? And when multiple paths look attractive, it actually takes a lot of work to try to deconstruct the right answer. For different companies, the answer could be different, with a lot of the same initial data. You see more and more of these companies that aspire to have that developer-led cadence, and then have the direct-assist motion on top of it. In the developer economy that’s really popular. Often companies will go to market first with that. But in many ways, the direct-selling motion is the fallback. If they know they’ve got a kick-ass product, and they’ve got a value prop, they can often then do the heavier sales assist, and put forward a great business in the end, even if the developer stuff isn’t the flywheel that they hope for. There’s some really unique optionality that is just starting to be possible over the last few years that the industry couldn’t have supported before.
On ‘startups’ as a target customer for SaaS companies:
I think that startups can be very sophisticated technology buyers, very critical customers and very constructive collaborators in the early days. So to that end, getting a few early stage, really sophisticated folks at any size and stage can be awesome. They can kick the tires [and] give you blunt feedback. They’re extremely frugal often, so they’ll cancel if it’s not working. That dynamic can be positive. However, as an aspirational customer set, bluntly, they’re among the worst. There’s an old adage of “as a startup, you don’t want to be betting on other startups.” We’ve had a great 10-year tailwind in the market where startups have succeeded at unnatural rates. But still, even mathematically, most of them fail. You don’t want to be in a situation where you’ve got this unnatural turn dynamic for reasons outside of your control. What you often see for this, the mass market approach, is companies coming in a level above that, which is called the lower-end of the midmarket, which can still be low friction, but it ends up being 10x the deal size of the startup community with a similar plus or minus buying cycle. You’re still going to pick up some of the startups that are going to find you and adopt you. But this idea of using that as your base … the reality is, hopefully, you’re going to grow faster than the average startup, and you’re certainly going to survive where the average startup fails. So the more stable and the more visionary your customer base, the more fruitful it’s going to be in terms of the platform for you to build on.
On the top quality he looks for in a founder:
The one word would probably be “superpower.” It’s notable because it’s probably different for each founder in each business. But I love to see an immense tendency to overachieve in something or to have some unfair advantage to absolutely crush a market segment. That could be product insight, market insights, go to market, it could be hiring or it could be inspiring leadership. But time and time again, I find that our CEOs that achieved the greatest heights are absolutely superhuman in at least one area.