Lured by the success of companies such as Workday and Marketo, consumer internet and mobile entrepreneurs have flooded into enterprise startups.
This new wave of entrepreneurs has leveraged their consumer DNA to reimagine the way enterprise users consume software. They have injected beautiful design and streamlined user experiences, which make their software seem both fresh and familiar to users in a business setting. However, the best product does not always triumph in the land of long sales cycles, custom integrations, and the dreaded procurement officer.
In order to win in enterprise markets, startups need to build world-class marketing, sales and services organizations. Today’s product-centric entrepreneurs should follow in the footsteps of market leaders such as Box, Yammer and Veeva Systems and reevaluate these three common startup myths from the consumer internet:
Myth #1: If our product is great, then word of mouth virality and organic search will generate the web traffic necessary to drive growth.
Organic search and word of mouth virality are great for acquiring individual users, but they are not sufficient for grabbing enterprise decision makers. For example, Box has a freemium product with virality built-in through file sharing. This customer acquisition channel can generate enough paid conversions to sustain meaningful growth at the consumer and small to medium business levels.
However, when it comes to generating enterprise leads, demand generation techniques are absolutely necessary to feed an enterprise sales team. Box uses a combination of content/influencer marketing, paid search/display advertising, conferences and channel partners to target and build a pipeline of decision makers.
Myth #2: If our product is easy to try and customers can sign up with a credit card, then I do not need expensive sales reps to sell it.
Self-service sales models work very well in situations with single decision makers and low price points. However, self-service models break down at the enterprise level. Yammer built a great self-service model where SMBs or managers within an enterprise could sign up a team with a credit card. Yet when it came to enterprise-wide sales, Yammer discovered that inside and direct sales reps were necessary to manage and win enterprise contracts. In particular, sales reps are able to sell to multiple decision makers within an organization, push contracts through procurement, compete in RFPs and negotiate service level agreements and integrations.
Myth #3: If our product is designed so that it is intuitive and easy to use, then I will not need professional services.
Low or no-touch service models are critical for consumer startups given the scale of their customer base. However, customer success and professional services organizations are critical for success with enterprise customers. Veeva Systems has built a world-class services organization that provides three key strategic advantages:
- Professional services that ensure customer happiness lead to low churn and positive references.
- The services team receives customer feedback, which is incorporated into the product.
- Professional services controls the integration experience and timeline, which is critical for driving upsells. Most enterprises start with small pilots, and you cannot upsell a pilot until it is deployed and successful.
When consumer startups scale, they require capital to expand the product and support the user base. Conversely, when enterprise startups grow, they require capital to scale sales, marketing and services.
When an enterprise startup is seeking a Series A investment, veteran investors will not expect that the CEO has definitively cracked the code on scalable demand generation, predictable sales and customer success. However, we absolutely want to see that startups have experimented to test hypotheses in each of these categories. Designing experiments, tracking metrics and iterating quickly are critical proof points that allow entrepreneurs to earn trust with investors because it demonstrates that they will spend capital efficiently.
Consumerization of IT has led to a renaissance of enterprise software. Now that entrepreneurs are designing delightful enterprise products, they cannot ignore the need to build the sales, marketing and services engines necessary to deploy that software into the hands of enterprise users.
As more enterprise solutions are coming to market, VCs will be even more discerning as they decide where to invest, so it is important for entrepreneurs to not fall prey to the myths of the consumer internet.