Craig Hanson, General Partner and Co-Founder at NextWorld Capital sat down with leaders of iconic enterprise tech companies to get secrets from their path from $1M to $100M+ in sales: Dan Levin, President & COO of Box; Dave Girouard, former President of Google Enterprise from zero to $1B revenue (now CEO of Upstart); and Marc Diouane, President of Zuora. One lesson reverberated through the conversation: there is no such thing as the one business model for your company that will get you from $1M to $100M in revenue. To grow, even to survive, you have to continuously be testing, adapting, and evolving all aspects of your business model.
Watch the full discussion below or read on for Craig’s highlights and lessons learned.
You’re a startup CEO in enterprise tech. You and your team have labored through the seed stage and behold, found that amazing light bulb of product-market fit. Congrats!!
Now, get ready to change everything.
That business model in your hand won’t likely get you to $100M+ in sales. It will probably just get to you $20M. Get ready to reinvent yourself 2 to 3 times over the course of your $1M to $100M path.
Your model has to be dynamic. Static will get you left behind. For sci-fi nerds like myself, conceptualize that you’re not building the first-generation Arnold Schwarzenegger-style Terminator, you’re building the liquid-metal upgrade version that forms into different things to keep up the chase.
When a CEO and exec team embrace that their business model should be flexible, they’re able to create a great culture of “dynamic dissatisfaction” — constantly testing and questioning, looking for change, and leading every part of the organization toward each new evolution.
To embrace flexibility and adaptation as a company, you need to start with a focus on radical simplicity. This is especially true in product, but is important across all departments. The less complexity you have as an organization, the quicker you can iterate and adjust to changes. Says Dave Girouard, former President of Google Enterprise from zero to $1B revenue (now CEO of Upstart): “Realize you have to say “no” to a ton of things. Simplicity is a feature and you should fight like hell for it as much as you can.”
Girouard continues, “Starting with a product, the usual thing [happens with] large customers and everybody else pushing complexity into your product and trying to serve every 2% of users who have different needs. But the organizational complexity — how your sales teams are structured and compensated — everything about enterprise business is pushed toward real challenging complexity that ultimately becomes inertia and slows things down.”
Your product roadmap will evolve over time. It has to. But it all starts with crafting the initial product blueprint to meet the unmet customer need or innovation gap you’ve identified. In the first stage, design for that amazing customer value with as much simplicity as possible — then fight all attempts at over complication.
“I think the single biggest thing I have learned that I would pass along to my younger self is to fight complexity as absolutely hard as you can — particularly in enterprise technology.” Dave Girouard, former President of Google Enterprise (now CEO of Upstart)
In the second stage of the product roadmap, look for ways to deepen the value for your customers. Dig into their usage patterns and adoption, and look hard for places where engagement is not as thorough or sustaining as it could be. Deepening value may come from new product functionality, the rising value of the data you’ve accumulated, or even network effects. This has a huge multiplier effect in increasing your average ARR per customer and reducing churn — because a deep product is a sticky one.
In the third stage, expand the breadth of your product value to a broader platform. This can be from additional internal product development into adjacent functionality, or from acquisitions that add in new categories.
From my experience as an investor and board member, Zuora stands out as a case study in tremendously expanding the value of their product platform. They did it by constantly learning and growing the model. The product has grown from its inception as billing software for SaaS companies, to a comprehensive Subscription Management Platform that includes billing, CPQ, analytics, collections, revenue recognition and even an app marketplace (Zuora Connect).
As you expand the breadth, focus on product additions that align with your sweet-spot customer focus and sales motion. I’ve seen companies get into trouble if the actual buyer is different, how you need to position and market the company is different, or if the sales organization needed to sell it is different. If this is the right move, recognize and prepare for this, for instance by adding the sales talent and processes to go after an up-market customer base for a high-end product. Otherwise, you could effectively end up trying to run multiple companies inside one organization.
As Marc Diouane notes, “You need to push your entire organization outside their comfort zone, and there is what they call negative friction and positive friction. A positive friction is being capable to acquire customers that will challenge the product organization, will challenge the way your demand gen [works]. This is how you evolve as an organization.”
“You need to push your entire organization outside their comfort zone, and there is what they call negative friction and positive friction. A positive friction is being capable to acquire customers that will challenge the product organization, will challenge the way your demand gen [works]. This is how you evolve as an organization.” Marc Diouane, President of Zuora
As Diouane notes: “You can have the best product in the world and the best fit in the world, but your ability to have the right people to help you scale your organization is probably the most critical success factor.”
Dan Levin, COO for Box explained a great formula for hiring, which resonates with my experience.
“Making sure that you hire people who can do the job 2 years from now, when it is 4x the size, but are still capable of rolling up their sleeves and getting the job done today is really important.” according to Levin.
The “2/4/Today” formula is a great guidepost to hire people for: 2 years ahead, 4x the growth, and who get the job done today
The people needed for your team will grow and change as the company evolves and expands. Some people will scale into larger roles, or morph into different ones. As a CEO or manager, you want to be constantly looking for areas where you need to fill expertise gaps, or for when it’s time for someone to hand the baton to the next runner.
This change isn’t a bad thing. Most people generally have a sweet spot zone where they are most effective, and then people grow themselves beyond that at differing rates. If a change in personnel looks helpful, oftentimes it’s simply because a new skill set is needed (for instance, going from scraping to sell the first reference customers, to managing a large, diverse organization), or because you need additional expertise (for instance, if the company is moving to add large enterprise targeted accounts).
“Making sure that you hire people who can do the job 2 years from now, when it is 4x the size, but are still capable of rolling up their sleeves and getting the job done today is really important.” Dan Levin, COO of Box
The most striking area for continual evolution is in the Sales and Marketing model. Keep testing and iterating to find the sweet spot of your best customers. Keep refining the sales model and track metrics rigorously — segmented in detail by type of customer and product. Keep refreshing what your competitive edge is compared to the competition (which, most likely, is evolving, too). As Levin notes, “You have to be super data-driven, and listen hard.”
Along the way, you will have failures and false starts. If you recognize them soon enough and learn from them, that’s ok.
Recounting a difficult year where Zuora hit challenges in its rapid sales growth and spent a lot of time dissecting their entire process, Diouane said: “That year was probably the most difficult one but the most rewarding one. That year helped us to be where we are today. Those difficult moments, don’t take them as difficult moments. It’s really fantastic learning. You should be in constant iteration. Every input you get from your team, every input you get from the customer, every input you get from the market should really help you diagnose the problem.”
Zuora’s target customer evolved, from SaaS companies to now Fortune 50 global corporates who started standardizing on them, as the giant wave of the “subscription economy” took hold and seemingly every business started looking for ways to transition from one-time sales to recurring revenue. Each step in Zuora’s evolution necessitated re-learning what’s required from the product, the engineering stack, sales, and the larger team to handle that greater complexity.
“To scale from $1–3M to $20M in ARR, small [customers] can help you get there. Then to keep [up] the level of growth at 40% or 50%, you need the large accounts. You need companies that can spend six or seven digits to enable you somehow to grow at the speed the market is really looking [for]. Moving from small to large organizations, it’s really coming with a different set of complexity,” notes Diouane.
Similarly, Box expanded its sales model from self-service to inside sales to enterprise field sales. But not without some failed charges along the way. As Levin explained, the key to their accelerated learning was data:
“[We were moving up-market], which meant the product was changing. We were thus having to change our go-to-market motion from first an inbound, web, self-serve motion, to an in-bound over the telephone motion, and eventually to an outbound field-based motion.. . . You have to be super data-driven, and listen hard.”
“Those difficult moments, don’t take them as difficult moments. It’s really fantastic learning. You should be in constant iteration. Every input you get from your team, every input you get from the customer, every input you get from the market should really help you diagnose the problem.” Marc Diouane, President of Zuora
Above all, we learn from some of the best enterprise tech companies that a dynamic business model is a necessity to adapt and grow, and that it never feels easy. I’ll leave you with this last quote from Girouard’s experience at Google Enterprise:
“To be honest, in all the ‘going from nothing to a billion [in revenue]’, I never felt like ‘Wow, we just have so much momentum…No matter what you got — ’Oh, we reached $10M a month or $5M.’ — whatever that thing is, you’re happy for about 5 seconds…I think that’s the nature of being in a startup. You have to buckle in and realize it’s only fun when you look back.”