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So you want to sell to the enterprise?
They'll be here tomorrow.
Ask for ten pitch decks from early-stage B2B startups, and you’ll get nine versions of this master plan:
Build a delightful product that users love.
Use that momentum to add features that small companies will pay for.
Use that momentum to add features that enterprises will pay for.
While doing that, disrupt an industry and dominate a huge market.
It’s a story everyone loves. It feels pure, even noble—the company isn’t some gauche and cynical sales apparatus, but on a mission to solve a problem and make people happy. It seems intellectually clever—rather than taking on entrenched and well-funded incumbents directly, the company will outwit them, via a clever maneuver they definitely will not see coming. And it follows in the spiritual footsteps of Silicon Valley’s biggest icons—put great products above all else, like Steve Jobs; start with culturally elite customers, like Mark Zuckerberg; leverage niche success into mass market appeal, like Elon Musk.
It’s also a story that rarely goes as planned. Because for every startup that pulls it off, there are a hundred that do this instead:
They identify a huge addressable market, defined by some vague and squishy term like “collaborative work management” or “application platforms.” That market, Gartner says, will grow to over $40 billion in 2028, at twenty percent CAGR. Budgets for this category are growing; CIOs are prioritizing it; there are many other impressive statistics and figures.
The company believes the best product will win—end users have the buying power now, not IT teams. The startup eschews expensive sales efforts or traditional ad programs; those are for incumbents, not insurgents. Nearly all their hires are engineers, and only the founders will do sales. One of the founders’ former colleagues—“Jamie, they’re a rock star, they can do anything, you’ll see”—joins as the only go-to-market hire. Jamie and the founders write blog posts, meet prospects, collect tweets of “customer love,” build community. Things are going well. They give the brand the same authentic, original voice that every other millennial startup has.
They start selling to small companies first, and mostly other startups. They work closely with these customers—“design partners,” in their pitch decks—to refine the core product experience. They listen carefully to feedback; share Loom videos; get on Zoom calls with customers early in the morning; fix bugs late at night. The CEO tweets screenshots of customers thanking them for it, with a caption that says that grateful emails like this—not the money or the status, but a note from an appreciative customer—is why they started this company. Their seed investors proudly retweet it.
They fill their private alpha with friends and former coworkers. The alpha becomes a beta. They close their first ten customers—more startups, mostly—through word-of-mouth referrals. They close their next fifty customers—more startups, mostly—through a blog post that got to number two on Hacker News,1 through a newsletter sponsorship,2 and through “product led growth.” They don’t worry too much about revenue yet.
Eventually—six months before a fundraise, roughly—they put an enterprise tier on their pricing page with a “contact us!” button underneath it.3 The premium features in the enterprise tier are just single sign-on and priority support (which is a bit ironic because the first customers still text the CEO when there’s a bug). But the enterprise plan isn’t meant to be sold; not really; not yet. It’s there so that they can build a pipeline, and learn what enterprise customers want. The startup is developing relationships; having conversations; becoming “enterprise ready.” It’s a process, they say; it’ll take a few months, a few quarters, maybe, maybe, a year.
A handful of companies fill out the contact form. The company talks to them; they get their feedback. “Do you mind if I record this call? I want the whole team to be able to hear from you.” The prospects tell them they think they’ve built something really interesting, and they’d love to stay in touch as the product matures. The company adds each prospect to Salesforce as an opportunity, and adds a slide in their fundraising deck that says they have $1.3 million in the enterprise pipeline. None of these deals will ever close.
The founders go to several VC dinners that are meant to connect entrepreneurs with enterprise buyers. They meet people from Goldman Sachs, Netflix, and Walgreens; from Verizon; from Pepsi; from a Comcast subsidiary that nobody knew was owned by Comcast. Someone from Walmart reminds people that Walmart thinks of themselves as a technology company. Capital One is there. Everyone seems interested in the startup; they ask for more information. The founders send them more information; nobody responds. The founders stop going to VC dinners.
A champion at an early customer gets a new job at Monday.com—not enterprise, exactly, but a public company. The startup decides to sell hard; they go all in on what Monday.com needs; they build the two features that blocked the sale; they close the deal. It’s smaller than they wanted, but still, six figures. They make a case study about Monday.com; they make an ad about the case study.
They talk to Target, and get told they won’t use AWS. They talk to Fannie Mae, and get told that they need more time. They talk to Fox—and they buy. Well, not Fox, but a digital marketing division of Fox Interactive. No matter; this is the plan, the company says; landing and expanding.
Every quarter, the startup’s growing executive team tells the board that they’re a few months, a few quarters, maybe, maybe, a year from breaking through. The enterprise pipeline looks good, and Jamie’s been crushing it, and we have an enterprise sales who’s been crushing it at Twilio lined up to join as soon as we’re ready. We just need a couple more features. And Jamie, actually, eh, we love Jamie, but we think they’re more of a zero to one employee; do you know any world class marketing leaders? No, we haven’t told Jamie yet, so please keep it confidential.
A year passes, and things are improving. Fox is growing. Autodesk is a customer; Capital One is back. But the goalposts keep moving. Disney was in the works for nine months, but the team just got reorged. The Philadelphia 76ers wanted to buy, but the champion left for a tech startup. JetBlue was a technical win, but their budgets got cut and they’re sticking with Microsoft, for now.
Another year passes. The product matures. Enterprise buyers stop talking about missing features; procurement teams stop dragging their feet. Security teams stop nuking deals at the finish line. Gartner put the company on their “Cool Vendor” list. It’s not the magic quadrant, but Gartner says that cool vendors often make the magic quadrant—although, it’s helpful to be a Gartner client first, so that the analysts can, uh, be fully informed about your technology. The startup says Gartner doesn’t matter anymore, and pays for it anyway.
The company attends a big industry conference as a sponsor. Their booth—a “pavilion,” officially, included in the $150,000 platinum package—is busy all week. They rent a F1 simulator. They raffle off a PS5. Their biggest prospect wins it. A fearless SDR lands a demo with Home Depot. And not some tech playground subdivision run by an amorphous executive, like the VP of Digital Innovation and Blockchain, or the Field CTO—no, it’s the real Home Depot, with VPs who are responsible for making sure that Home Depot makes money. The startup’s best account executive is randomly assigned the deal. The best account executive gives a pitch; the best account executive sticks the landing. Home Depot asks for more information; the VP of Sales sends it immediately after the call; Home Depot responds.
They respond to say that they loved the product, and see its value. But, the current customer base looks like it’s mostly small tech companies? Maybe now’s not the time, they say, at least not for their team. When we buy software, it’s a three- to five-year investment. But they’d love to keep talking, they say. They CC the SVP of Digital Innovation and Blockchain.
Waiting for Geico
Eventually, eventually, the dam will break. “Community-driven, product-led, bottoms-up, consumer-grade” startups can build enough product and brand and go-to-market machinations to become genuinely appealing to enterprise buyers. Slog through long enough, and Geico will actually show up, ready to be sold. But it takes much longer, happens much later, and is a much more fitful and distracting journey than almost every startup thinks that it is.
In the best cases, interminably flirting with the enterprise is psychological torture. It's hiking a trail that never turns downhill, or hoping for the trip that keeps getting delayed.4 And in the worst cases, the wait is fatal. A lot of startups model "selling to the enterprise" in their financial plans—they build budgets that assume their enterprise pipeline will start to close, and their average contracts will get bigger. They launch expensive account-based marketing programs to bring in Fortune 500 leads, and hire senior sales reps to close those deals. They assume their unit economics will get better once the accounts get bigger. And when the enterprise cavalry never shows up, the model—and sometimes, the business—goes sideways.
So what are startups to do? As best I can tell, most of them have two options.
The first is to assume that enterprise buyers aren’t coming. It’s tempting to believe that a company’s first $10 million of business can come from one segment of buyer—i.e., small businesses or other tech startups5—and the next $90 million can come from another—i.e., the enterprise. I don’t think that’s realistic. The buyers are too different, and products and brands are too hard to change. Whatever segment powers a startup to $10 million in revenue needs to be able to power it to $100 million.
If there’s a strategic flaw in most early stage startup’s business plans, it’s this. They assume—either explicitly, in their “master plan,” or implicitly, in which competitors they’re planning on replacing—that, once they reach $100 million in revenue, they’ll be making significant revenue from small companies, large companies, and other startups. Instead, companies should ask themselves if they can get to $100 million with eighty percent of their revenue coming from one of the three.6
The second option for selling into the enterprise is to start there, on day one.7 These startups brand themselves as enterprise software providers in their first TechCrunch article. They don’t source “design partners” from former coworkers and friends’ startups, or plan their launches around Product Hunt; they talk to Honeywell, and Starbucks, and American Express. They win their first customers by selling them, in effect, services instead of software—“we’ll sit alongside you and try to build exactly what you need.” And they don’t try to sell to enterprises despite the messy technical and cultural problems8 that fester inside of them, but because of them.
On a long enough timeline, any company can sell a product to both small companies and big ones. But for most startups, that timeline is well beyond a horizon that’s worth planning for.
“It was a community newsletter, so it’s good for our ‘No BS’ brand,” says Jamie.
“Some priorities came up we have to handle. So we’re going to have to put our trial on hold. You understand? Just for a couple weeks…maybe a little longer. I’ll call you next week, and we’ll iron out the details.”
Nobody does it, but I’d argue that startups should treat other startups as a different segment than SMBs or mid-market buyers. Startups are weird in that they operate like small companies, have ambitions to be big companies, and plan like the world is ending tomorrow. A 100-person company that was ninety people ten years ago and plans on being 105 people ten years from now is very different from a 100-person startup that was zero people three years ago, plans on being 500 people three years from now, and may well not exist at all in ten years.
Admittedly, I’m shooting from the hip on this one, based on anecdotes and hearsay. For all the VCs in the room that have access to this data, I’d be very interested in the actual numbers here.
And probably, before day one. I have no hard evidence for this either, but I’d guess that most enterprise startups are founded by people who either worked at or sold to enterprises before.
A while back, someone from a major financial company told me that his company is almost fifty years old, “with data in several different data storage technologies and going back decades,” built on “broken approaches to problem solving from 20 years ago.” When you modernize that, he said, it’s “not about the technology but modernizing how you approach solving problems.” A delightful user experience that gets a lot of votes on Product Hunt doesn’t help much there. (Which, to be clear, doesn’t mean you can’t build a great business on a delightful user experience that gets a lot of votes on Product Hunt! It’s just not a business that’s likely to win this guy as a customer.)