Startups

Selling into the enterprise: How Slack and other startups get it wrong

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Jennifer Smith

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Jennifer Smith is CEO and co-founder of Scribe, a Princeton and Harvard Business School alum and is a technology investor and adviser formerly at McKinsey and Greylock Partners.

When building a startup, you’re making what feels like a million decisions on timing — when to launch to time the market, when to hire that key role, when to raise another round. But one of your most important timing decisions might be one you aren’t even considering yet: When to approach the enterprise. If you aren’t debating that now, chances are you’re overlooking a big opportunity.

I saw this time and again while working with dozens of startup CEOs while at Greylock Partners. Approaching the enterprise can feel daunting for early-stage teams. Many founders would push back when I suggested it, and I get why: It’s uncomfortable and maybe even counterintuitive. A commonly heard refrain was: “We’re not ready. We’re too early. We want to optimize our product more first.” They were afraid that if they talked to large enterprise companies too soon, they’d blow it.

In my experience, the opposite is true. At a startup, you’re constantly trying to maximize learning in the tightest loops possible. The earlier you start, the more valuable the knowledge and iterations you accrue. Your go-to-market is no different.

I’m here to tell you it’s possible to be both a product-centric company and woo the enterprise at the same time.

A short history lesson

Take Slack, for example. A darling of startups across the Valley and beyond, Slack grew into a can’t-live-without technology for many teams. It’s a success by nearly anyone’s standards, and yet, it is a company that didn’t survive as an independent public company. Why? Because it couldn’t quite break into the enterprise on its own timetable.

Slack enjoyed hypergrowth among startups, but it got beat out by Microsoft Teams on the big deals. Microsoft used its enterprise credibility, deep distribution channels and raw muscle to block Slack from signing big companies that had to work within established protocols and existing infrastructure. Teams might not have had the same stellar user experience, but it met enterprises where they were and played by the buying rules they understood.

The result? Slack got acquired by Salesforce for $27.2 billion 12 years after it was founded.

To be clear, Slack’s acquisition — the largest in Salesforce’s history — is not a bad outcome. Lots of startups dream of such an exit, but it’s probably not the one the company was seeking given its darling status and enormous popularity. It was a catch-up move, a way to use Salesforce’s weight to get a shot at competing with Teams.

The question is, if Slack had considered selling into the enterprise sooner, could it have survived as an independent public company?

A bottoms-up approach to growth, like Slack famously championed, is fantastic, until it’s not enough. Having helped dozens of portfolio companies approach the enterprise at Greylock Partners and now as a startup CEO myself, here’s some advice on how to avoid common missteps:

Start sooner than you think you should

Some of the most commercially successful companies in the world today engaged with enterprise customers before they even had a product. The purpose is to gather intelligence about what a customer would want, what they’d value or how they’d evaluate their product. Startups can gain important information that may help shape their trajectory and get the product enterprise-ready much faster.

While it may fly in the face of the conventional, “safe” wisdom startup founders are trained to accept — that targeting smaller companies translates to an easier sale — there’s never a better time to approach the enterprise than early in the lifecycle.

Then, when it’s time to begin selling in earnest, the door to the enterprise has at least been cracked open. Founders often think it’s not worth the effort to go big when they are so small and resources are scarce, but a buying decision is still just a buying decision, and larger enterprises have larger contract values even for nascent sellers.

Rather than getting stuck in a midmarket trap that still has nearly all of the work of an enterprise deal without the annual contract value that enables scaling and staffing, aim for a big fish or two at the same time. You might surprise yourself by winning big contracts there sooner than you expect. And if not, you’ll likely accrue some valuable insight that will increase your odds of winning the next time.

Pick the right customers

Not all enterprises are created the same. Some pride themselves on being innovative (they may even have programs to seek out startups), and these are usually first movers in their industry. Such companies will be your target customers and early adopters. Successfully woo one of these companies and others in their industry will notice, and when they follow later, they’ll require less work because you’ve already been tested and accepted.

Similarly, not all enterprise executives are the same. You want to find people who see themselves as innovators, who feel a deep sense of responsibility and a strong belief in the power of technology to transform their business. Among technology leaders, the distinction is often drawn between the CIO who “keeps the lights on and the trains running” and someone who pushes an innovation agenda. You clearly want the latter. Unfortunately, among the hundreds of CIOs I’ve met, I’d say maybe 25%, at most, of big company leaders fit that description.

How can you tell who falls into which category? Just listen carefully to their questions. If they ask you things like:

  • Can you assure me you’re still going to be in business, providing this product in five years?
  • How many others in my industry have already bought your product?
  • What does Gartner say about you?

These are fear-based, reactive questions instead of forward-looking prompts focused on what makes your technology unique and what it can do for the business. Don’t waste your time here.

The easiest and quickest way to find the people you want is to talk to VCs and other startup founders. Customers develop reputations pretty quickly, and your network can help make sure you’re spending valuable time with the right people.

No matter how good the product is, you are still selling you

Especially in the early days, customers are buying from you as the founder, not your company. They’re taking a bet on you, your vision and your ability to help their business not just right now, but how you can help them grow.

That’s why it’s critical to build relationships with your customers as early as you can. Understand what’s important to your potential customer. What are their top three priorities for their business? What will make them personally successful? What’s holding them back today? And most importantly, how can you help?

Frederic Kerrest, COO and co-founder of Okta, was probably the best I’ve ever seen at this. He’d walk into a room full of C-level executives and walk out with a fistful of business cards and follow-up meetings. While he is an incredibly likable guy, he also was able to quickly understand a customer’s priorities, build trust and be direct about what he could offer.

Customers buy from people they know, like and trust, even if they aren’t ready to buy right now.

Lean into what you can do that incumbents can’t

You have several advantages against incumbents. Do you have a product-led growth motion? Can users trial or even use your product on their own? If so, leverage that in the enterprise. Do demos where you get users at enterprise firms to trial and then advocate for you, and leverage your growth loops to expand your user base in that account while working with the buyer’s decision-makers.

As a startup, you also can deliver higher-touch service. Any single enterprise customer matters a lot more to you than it does to your incumbents. Treat your customers as such, and go above and beyond in offering consultation, support and guidance. Unless they’re the biggest fish in the ocean, Marc Benioff probably isn’t giving them his personal cell number in case they have any issues. But you can.

On the product side, this might extend to offering more custom features than they might get elsewhere. This area is rife with danger, because it is important for early-stage companies to make sure they don’t spend time building custom features for a few customers that don’t scale to others. To mitigate this, try to get a deeper understanding of what the customer is trying to achieve. Often, I’ve found they don’t actually need the feature they’re requesting; they’re just used to having it and ask out of habit.

Then consider the trade-off for building it: What’s the level of effort compared to the benefit of having this customer? Is this unique to them, or will it address needs for similar customers down the line? Finally, and most importantly, is it in line with your vision for your company? Does this get you closer to the future you envision?

With all of those caveats in place, consider adding features that deliver value to big prospects and contribute to your desired roadmap. Customers may reward your dedication, and their foresight could open new doors to other customers you hadn’t even thought about yet.

Turn “later” into an “and” right now

Founders and VCs are all abuzz about product-led growth and a bottoms-up approach to user acquisition these days. For good reason: It’s a very attractive go-to-market strategy. If you can do it, this is the way to go.

If you are a product-led growth company like Slack, your optimal go-to-market strategy may very well be to continue product-led growth and pursue the enterprise simultaneously. It’s not an either/or, or an add-on later, but an “and” right now.

If you ever plan to sell to the enterprise, the time to engage with them is now. The relationships you build and the knowledge you will develop are invaluable and only compound over time. You want to start this compounding as soon as possible — even if you don’t feel ready.

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