Navigating Your SaaS Product Launch, Lead Generation, and Enterprise Sales: Starting From the Bottom-Up
February 24, 2022
When David Sacks and his co-founders started Yammer back in 2008, the term product-led growth (PLG) hadn’t even been invented yet. In fact, it wasn’t until 2013 that first OpenView’s Blake Bartlett coined the term.
David shared his insight from his experience as a product-led pioneer—how he grew Yammer and what strategies have been successful in subsequent SaaS ventures—when he joined Blake Bartlett for a conversation on the Callin app.
David was starting a software business at a time in the industry where selling products to enterprise executives was the norm. Coming into the project from the consumer world, he felt no allegiance to the B2B status quo.
“When we started Yammer, we were a bunch of consumer internet founders who decided to attack the enterprise,” says David. “My mindset going into enterprise software is why can’t we hack the distribution the same way that we did at PayPal with consumer products?”
The strategy with Yammer was to effectively bypass the IT department and allow employees to use the software they want by simply pulling out a company credit card and swiping it. “It wasn’t called consumerization of the enterprise yet, but that was basically our intuition,” David shares.
This intuition aligned with the strategy we refer to today as product-led growth (PLG), also known as bottom-up—a reference to how adoption starts from end users at “the bottom” of the enterprise and works its way up and through the entire org.
Knowing when to go PLG
What Yammer found was that this early PLG strategy was incredibly effective at generating pipeline because employees would start using the product and spread it to their coworkers. “Virality worked in terms of filling the top of the funnel, but it was very hard to get enterprises to self-serve,” says David.
Despite generating all their leads from the product itself, Yammer built out a fairly traditional enterprise sales team. From here, the sales process was much easier as the employees had already adopted the product. It was only a matter of convincing someone with budget and authority to ratify what the employees had already chosen to do.
Nowadays, a PLG or bottom-up strategy is the default in SaaS—where, on the most basic level, somebody can go to your website, sign up, and use the product on either a freemium or free trial basis.
There are cases, however, where it makes sense for a software product to have more of a demo-first type of sale. According to David, what it ultimately comes down to is the complexity of the implementation of the product:
“If a user signs up but can’t figure it out because it’s just too complicated, or there’s some massive implementation that has to take place first before they can get value out of the product, you’re better off putting them through a sales demo before letting them sign up.”
The economics of building team products
When asked what atom within the user base you should be building for—an individual or a team—David shows no hesitation: “There’s a clear answer to this: If your product can be a team product, teams are better.”
He boils it down to net dollar retention. For any B2C subscription product, you’re lucky if the net dollar retention after one year is as high as 50%. These businesses have to account for 5% monthly churn rates—sometimes more. The problem with B2C when you’re in “single-player mode” is that there isn’t an opportunity for expansion. There’s only one user, and if they churn, they’re out.
David compares this to team and enterprise products: “For good team or enterprise products, you’ll see anywhere from 120% to 200% net dollar retention. So in other words, the expansion is exceeding the churn. You are going to lose customers, but the customers who stick with you are expanding so much that it’s more than compensating for the churn.”
And churn rates in general for team products are lower. Everyone making the decision to abandon a team workspace is harder. The product is stickier. It’s not that these “single-player” products aren’t useful, but that the economics of team products are fundamentally better.
Nailing the product launch
Once you’ve built a product and you’re ready to launch it to the world, it’s time to address the cold-start issue. You may not have any users yet, but you’re confident that the product is going to be great. The question remaining is how to acquire those initial users and get the flywheel spinning from a standing start in a PLG or bottom-up motion.
Your first step should be to get a handful of beta users on the product. You only get to launch once, and you don’t want to use it to uncover a bunch of bugs and unanticipated usability issues. David advises that “it’s better to have a quiet beta period or waitlist period in which you’re not wired to the whole world, but you’re just really dialing in the product.”
People have much higher expectations for usability today than they did in the past, especially if your product falls into an existing solution category. If this is the case, your product should perform 10x better than the existing alternative from the get-go.
“A successful launch does not necessarily mean a successful company or a successful product,” Blake warns, “You can have a lot of launch excitement and users like the novelty factor for a week, but then they find the bugs or they realize that all your product offered was that novelty factor—that isn’t really staying power. Especially these days with resources like Product Hunt, founders focus so much on nailing the launch that they focus more on the sizzle than they do the steak.”
“The old axiom of ‘you should be embarrassed about the first version of your product’—I think Reid Hoffman said that a while ago—just isn’t true anymore,” says David. “I would replace that with ‘don’t waste your launch on finding bugs and problems. Use that to find your initial paying customers.’”
Yes, you still need an enterprise sales team
When it comes to generating leads and ultimately closing sales with a bottom-up or PLG model, the biggest step is simply putting your product out there. If you hypothesize the wrong ICP with a bottom-up model, the customers you didn’t forecast still come in anyway because they found you on Product Hunt. Almost proverbially, David affirms that “if you build it, they will come.”
But even a product-led company should do some marketing and PR, which results in some product awareness. The early adopter crowd will sign up. And then, especially for an enterprise product, you rely on sales to convert or assist conversion.
Even with a self-service model where the product itself is doing the heavy lifting of lead generation, the role of your sales team is indispensable when targeting the enterprise. Whereas in an SMB motion, you might just have to get on the phone with the business owner to close the sale, the reality is that enterprises want to deal with salespeople.
“Assuming you’re in an enterprise deal of any meaningful size, they’re going to have a procurement person. And you’re going to have to go through procurement to get the budget for that six- or seven-figure deal to get that check. And they may have a mandate from their company to negotiate with you,” explains David.
“Then legal is involved. They’re not just going to want to sign your clickwrap agreement—they’re going to have red lines to your terms of service. You’re going to be dealing with some lawyer there. Then you’re going to be dealing with IT—and they may be demanding SOC 2 or single sign-on. So you’ve got all these stakeholders that have to be managed and brought on board.”
It’s more than likely that the founder lacks the bandwidth and expertise to handle all these loose ends. Put simply, if you want to do enterprise sales, you need a dedicated enterprise sales team.
There’s also the often underestimated value of the sales assist. Even for companies selling primarily to SMBs, there can be additional lift by having a salesperson reach out in some way to a prospect. Your conversion rate can be boosted by just having that salesperson try to assist the sale as opposed to relying entirely on self-service.
Blake emphasizes the impact provided by an experienced sales team: “It’s really strategic pressure applied at the exact right point to the exact right person to get faster and bigger conversion.”
Building your org—from the bottom-up
What does a product-led org look like compared to old-school Saas? When you are building your company as a startup, you’re faced with decisions of who to hire, when to hire them, and how to get people working together.
“We initially thought we didn’t need any of those enterprise functions like sales, marketing, or analyst relations,” says David, “And we found that we ended up needing them all. The question is when.”
Starting with product and engineering only makes sense, because you have to have a product to have a business. Then, David suggests you hire that first salesperson to help the founders put deals over the top. Next comes your marketing generalist to help raise awareness. And if everything goes well from there, you start building out your teams.
David has spent a lot of time thinking through this process of organizational expansion: “I actually published a blog called The SaaS Org Chart where I laid out where the org is at a Series A, then here’s what it looks like at Series B and C. And what you see is that in that early Series A org chart, it’s really a bunch of generalists. And by the time you get to the Series B, like 100+ person org chart, all those generalists have been blown out into teams—and maybe that generalist is running the team—but you have a lot more specialist roles.”
PLG unleashes the next generation of SaaS founder
One of the biggest changes attributed to the PLG or bottom-up model is that it enabled a different kind of SaaS founder.
“If you look at who was founding enterprise software companies before bottom-up, it was founders who frankly had some background in sales,” explains David.
Today, we see that the background of a typical SaaS founder is no different than the background of a consumer founder. They might be an engineer who didn’t know anything about go-to-market strategies and the enterprise. These founders just focused on what they did best—building a great product. Then, the product could start spreading, and that in itself would become the necessary proof to convince other companies to adopt it and to convince the requisite talent to join the operation.
Blake agrees that today the SaaS founder is liberated from any template—even a technical one: “The other thing that’s been really interesting to see with product-led and bottom-up is that there are lots of people that are product-oriented founders without being technical. Valuing product, having product vision, being really focused on product strategy. And even thinking about your product as a growth engine itself that is central to your go-to-market function—none of that implies that you actually have to write lines of code.”