...don’t move upmarket (just yet) 👀
Acknowledging the adoption chasm, why the most complicated enterprise software risks commoditization, and hiring a first marketer based on category awareness, not convention.
Welcome to the thirty-fourth edition of The Baton. A fortnightly newsletter that brings you three, hand-curated pieces of advice drawn from the thoughtful founder-to-founder exchanges and interviews taking place on Relay and the interwebz. So, stay tuned!
In this edition, you’ll find instructive and inspiring pickings from the brains of Outreach’s Manny Medina, Databricks’ Ali Ghodsi, and Outfunnel’s Andrus Purde.
Recently on Relay:
Heuristics and Hunches: Shaping the Self-Serve Path to the First 1,000 Customers: An Exchange on Adopting Freemium with Lou’s Rachel Pardue
#1: “Don’t sell too early to people who’re on the wrong side of the adoption spectrum” — Outreach’s co-founder and CEO, Manny Medina, cautions against the time-swallowing allure of pursuing big deals during the early stages. (Source: Surf and Sales)
This happens to a lot entrepreneurs that your VCs will tell you to ‘move to enterprise!’ ‘Land a big company.’ So you hustle and land somebody huge. And we did that early on with a really big telco.
And it was so hard to deploy, it was so hard to get people to adopt. I feel like there’s a mindset almost that you sell into…Crossing the chasm is real. There are some people who are the innovators, who adopt your product, and you slowly move to early adopters.
Don’t go and sell to the laggards. They’re just not ready for you. They may buy you. And then you’ll spend all your waking hours trying to get them to do something. Which is such a waste of time.
When investors tell you, ‘oh, all your customers are tech companies.’ Of course, they are. Because they’re innovators. So we’re not just selling to each other, it’s a real economy out there.
There’s nothing wrong with being tech-heavy. That’s how you build a product on the back of them. They push you around. They help you get better. And once you have a scalable product, you can go and sell to AT&T and Walmart. Whatever that is.
Don’t sell too early to people who’re on the wrong the side of the adoption equation. Because it’ll be an enormous pain in the ass. You’ll waste all your cycles on that, and you’ll do unnatural things that you’d regret you didn’t.
#2: Leveraging SaaS and open source together — Databricks’ co-founder and CEO, Ali Ghodsi, on why he believes that pairing the best of these two software models can produce markedly more defensible offerings. (Source: Billion-Dollar B2B)
Open source has been around for a long time. The primary business model to get revenue out of it has been to sell services, support, and giving away the software for free.
But the problem with that business model is…the value you’re really selling then is in the support and services. And that quickly gets commoditized and other people come in and do that cheaper than you. And then it eventually gets outsourced…and then you don’t need the open source vendor to do that.
But what if you weren’t giving away software for free? It is open source. You can download the source code if you want. But you’re renting it from me in the cloud. And I’m giving it to you as a service. And you’re paying me recurring revenue for it.
That combination now is different. It’s no longer the case that you can easily just replace me with someone else. You’re using the service. And what I have to do then is get really good at operating that service.
And those things might not be an open source project. Things that have to do with running that service efficiently at scale. Super securely. No one wants to have a data breach. How do you make sure it’s reliable? How do you make sure it’s super fast and performant? How do you make sure it has great experience? That you can all build in the cloud and you can make it proprietary…
So I think if you just focus on a SaaS service for your open source software and then focus on [building a] moat around managing that service really, really well. I think it’s a great business idea.
I think it could beat people that are doing proprietary software in the cloud, because why would people want to get locked in to your service? And you get more mindshare as more people download the open source software and write about it. That huge community also becomes a moat for you.
So I think over the long term you’ll see this repeat itself. And it’s going to happen to the most advanced software that’s ever been produced…
Linux showed that you can do it for the most complicated software, which is operating system’s lower level, you can come in and disrupt that and do it better than proprietary software in the market. So any software on the planet is ripe for commoditization by open source.
#3: Revisiting a conventional first hire (“full-stack marketer”) recommendation — Outfunnel’s co-founder and CEO, Andrus Purde, pushes away from the idea of bringing in a generalist as the first marketing hire. (Source: Purde.net)
Conventional wisdom is to bring on a “full stack marketer” that can adapt to needs as the company, product or target customer evolves. Which makes sense because you’re aiming to take care of all aspects of marketing.
The best “full stack marketers” know a little bit about all marketing functions but they’ve developed deep expertise in one of them. Such professionals are sometimes dubbed “T shaped marketers” with the horizontal stem of T representing everything they know about and the vertical stem representing the area(s) they know inside out.
Ideally, the vertical stem matches with what your team or startup needs.
For many B2B or B2B startups with a self-service model (ie. customers buy without talking to sales), the ideal core skill is acquisition marketing.
For many sales-led b2b companies this is product marketing or communication.
If you’re establishing a new massive and futuristic category, or if you’re the next Google or Facebook, it’s probably communication.
You can get even more specific.
If you map the category awareness and category urgency for your company (which takes less than 5 minutes, I’ve written about this here, you’ll know exactly what channels the acquisition-minded marketer would probably need to cover, so you can be even more specific about the required experience when assessing candidates.
Until next time,