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a16z Podcast: When Organic Growth Goes Enterprise

The consumerization and developerization of B2B
Dropbox is the fastest SaaS company to $1B in revenue run rate with 600+ million users. This is just an example showing that companies are adopting software in a completely different way in recent years – we have individual users/developers picking out products that they want to use, and then it eventually spreads inside the organization.

This is the engine that powers Dropbox, Slack, Asana, and many other new companies. It brings together all the growth levers: Viral growth, performance advertising, consumer growth techniques – but also inbound marketing, enterprise sales, etc., etc.. It’s a great trend that brings together folks with consumery backgrounds (like myself!) and my colleague Martin Casado (prev Nicira, acquired by VMWare).

There’s a spectrum that goes from Atlassian (all self-serve, no enterprise sales team) all the way to a traditional enterprise company like Oracle. Startups have to choose where they want to play, and what organization they want to build. A lot of interesting nuances here.

a16z Podcast
Today, I want to share a new podcast on When Organic Growth Goes Enterprise – this is a podcast that includes Martin and myself, with DocSend CEO and co-founder Russ Heddleston, in conversation with Hanne Tidnam.

(I’ve previously been interviewed on the Andreessen Horowitz podcast – you can subscribe here. My previous one was a two-part series on the basics of thinking about growth, from acquisition to engagement.)

Topics
Questions we talk about:

  • What exactly does more bottoms up growth for enterprise look like?
  • How does organic growth map into the direct sales model we traditionally see in enterprise?
  • How does it affect company building overall?
  • What changes in how we evaluate growth
  • How can those two different models work best together?

Transcript

Hi and welcome to the a16z Podcast. I’m Hanne, and today we’re talking about another aspect of growth. This episode is about the growth typically attached to bottoms up consumer companies, but that’s now more and more showing up in enterprise. So what does that more bottoms up growth for enterprise look like? How does it affect company building, how does it change how we evaluate growth, and what do we look at?

Joining us to talk about the tactics and questions we should be thinking about in this kind of hybrid scenario are a16z General Partners Martin Casado and Andrew Chen, and Russ Heddleston, CEO and co-founder of DocSend.  

Hanne: Let’s start with the super basic question, which is what exactly are you starting to see happen with this shift in enterprise?

Martin: So traditionally in the enterprise, you’d build a product, and that product would be informed by your knowledge of the market. And then once that product was ready, you’d go ahead and sell it by hiring salespeople and the salespeople would go directly engage. You’d probably do some sales-led marketing where maybe the salespeople would go find the customers or you’d have some basic marketing to do it. But the majority of the go-to-market effort in the early days was this kind of direct sale.

And we’re seeing kind of this huge shift, especially in SaaS and in open source where companies establish massive market presence and brand and growth using these kind of more traditional consumer-ish growth motions. And then that very seamlessly leads into sales, and often a very different type of sale. And so I think a lot of people in the industry are on their heels, both investors and people that have started companies in the enterprise before, they’re trying to understand exactly what’s going on.

Hanne: Is it actually seamless? Is it a seamless transition there?

Martin: Well, I mean, that’s often the question, right? So we’ve seen companies moving on either sides of this. Some companies are like, “You know, listen, we’re just going to do organic growth.” And they don’t actually do sales. And in our experience, these tend not to be kind of hyper growth on the revenue side. Right? So they’ll continue to kind of growth customers, but it’s hard for them to get these nice, hyper linear revenue growth.

On the other hand, we see companies that will just do sales. And for them, it’s actually very difficult to grow quickly because they don’t have the type of funnel that you’d get from the growth metrics. And the ones that seemed to have figured it out the best, what they’ll do is they’ll create kind of a brand phenomenon. They’ll get this growth, they’ll get that engine working and then they do kind of tack on some sort of sales on the backend and then those two motions work in tandem.

Russ: So if you’re a small startup, breaking into that big ACV sale is tough. You’ve got to have a really high annual contract value and everything is going to be more crowded. And it happens occasionally but it doesn’t happen as often. And if you’re trying to target a specific buyer, just getting access to them can be very challenging and that’s just a huge hurdle to overcome. Like, how on earth could anybody break into that? Consumer understands a lot of different tips and tricks because you have to be really frugal to acquire a customer that you’re just supporting with advertising to get someone who you make six bucks a year off of. You can’t spend any money to get that person. So there are a lot of tactics there that are really interesting. If you apply those to some of the B2B value propositions, you can actually break in in a way that no one else was really thinking about before.

Hanne: Well, let’s get into those. What are some of those?

Russ: The way we broke into the market is we took a relatively simple workflow which is sending content from one business to another business. And so we said, “Okay, a better way of doing that is to allow the person sending it to create 10 different links to the asset, send them off to 10 different companies and see what happens to them.” How long do they look at each page? Who do they forward it to? You can see what people care about.

And so the first version of DocSend was just free. That actually just gets people using the product, and it’s cheap enough that they can keep everything else in their stack. So we’re not replacing anything, we’re purely additive at that point. And that’s really how we got our toe hold in the market.

Andrew: Russ, how did you get your first 100 users?

Russ: I think the first revenue we got was in the form of a bottle of whiskey that someone gave me as a thank you for giving them a account that they used for their own fundraising process.

Hanne: What kind of whiskey?

Russ: You know, I don’t actually remember it. I think the office consumed it relatively quickly so I don’t think it was around for very long.

Andrew: But from a top of funnel standpoint, where did you get the first…

Russ: It was all word of mouth. Forty-two percent of our signups are still word of mouth. Twenty-eight percent of our signups are from someone viewing a link and then getting interested and coming into the product.

Andrew: when you look back at Dropbox the first thing they did to get traction was to announce on “Hacker News” and also “Dig” at the time was such a big deal, right? These days, maybe the actual platforms have changed, like, maybe you go to “Product Hunt” instead, maybe you go to Twitter. But ultimately, doing a big announcement but then kind of getting the all sort of viral word of mouth means that a lot of your first users end up experiencing it because one of their friends wants to show them the product, or they just decide they want to try it. As opposed to having somebody sort of email you or call you up.

Hanne: Is there a certain kind of company that this works for better than others?

Andrew: I think that there are certain kinds of products that can be all the way pegged to completely self-serve, bottoms up versus maybe what’s kind of in the middle. Is the product a horizontal enough product that literally you can bring almost all of your coworkers things like Dropbox, Asana, Slack, these are all things that everyone in your company can use, and so naturally is going to spread much faster because at every moment, each node in the network is going to be able to have access to all 15 to 30 people around them where it can spread.

The second thing is products that are actually really front and center in your workflows, all the acquisition that we see, especially virally, happens because of engagement. They’re deeply, deeply linked with each other. Because as you engage and as you’re using the product more, inevitably then you’re sharing links, you’re assigning tasks to people, you’re commenting on people’s files. These are all things that bring people back and bring new people into the product. there’s a whole class of products that aren’t completely horizontal that maybe only apply to a particular job title or function. And so that all of a sudden gets harder because maybe it can spread within the department, within the function, but it’s not going to go really broadly. And eventually you get to the set where it’s like, maybe there’s only a couple buyers in the entire company. And for that, you don’t go bottoms up at all. It’s just literally impossible.

Hanne: So this middle zone is what we’re talking about, where there’s some indication but it’s not completely horizontal and viral. It needs a little bit layered on.

Andrew: The new thing is that the fact that users can then bring these products into their workplace, and you might get a large company of 20,000 people with a patchwork of folks using a whole bunch of different products before IT actually makes a decision. Like, that’s new and very interesting.

Russ: Every company tends to have some form of super power that’s available to it based on just what their business is and what their product does. So we typically add features in one of three buckets. One is to increase the spread of a business to another business. One is to get more lock-in within a company itself, so getting that spread within the company. And then the third is just making our customers more engaged. because the more they’re using it, the more they’re sending it outside the company. Our top request at one point was, “I need to send a folder of content.” And you’re like, “Okay, that makes sense.” But what they really wanted was this kind of deal room thing. So we ended up building Spaces. And that just really increased engagement of our customers.

Andrew: That is why with the investor hat on, one of the really interesting things that, Martin, you and I end up talking about with these bottoms up companies is evaluating the engagement on the products using consumer metrics. Because often, it’s the engagement that’s really the leading indicator for growth, but from an acquisition standpoint as well as retention, which then is sort of the leading indicator for, like, are they actually going to renew their subscription over time?

Martin: So to me, this is one of the key questions. We see these companies that fall in between this kind of consumer-ish growth in this enterprise thing. And actually a question I’ve been meaning to ask you that I haven’t yet but this is a good opportunity, so is it the right thing to evaluate these things purely from a consumer lens? Are the growth patterns the same as you would see in consumer XX? Let’s even just put aside the question of sales. Should the growth metrics be the same as a consumer company?

Andrew: When you’re evaluating even purely consumer products, you have to really look at what the expected behavior is. And so I would kind of turn the same question for the kinds of things we’ve been working on, which is obviously if you have users that are trying out some new email security product, let’s say, hopefully they’re not interacting with it that much. But if the whole pitch of the company is, “Hey, this is going to be the system of record for everything that your team’s going to work on for all of their projects, or whatever, and they’re going to use it every day,” then it’s like, “All right, then let’s actually start using, you know, daily active metrics in order to evaluate if that engagement is actually there.

Hanne: What about from your point of view, Martin? Are there metrics that you…

Martin: Well, yeah, I think it starts to get a little complicated. So there are a number of consumer metrics you track. One of them is engagement which gives you a sense of how often it’s used, and maybe that’s something that you can proxy to value. There also is just simply top of funnel growth, right? How many people know about it, what is the brand? The world I come from is nobody knows about the product when you start. There is no organic growth. Marketing is, at best, linear with the dollars you put in, the number of customers that are top of funnel, it’s probably sub-linear. All the value and monetization is driven my direct sales and so you’re…

Russ: It’s account-based sales.

Martin: It’s account-based sales. So your ACV has to be high enough to cover the marketing cap. So that’s one bookend. The other bookend is all of this growth stuff you do acquires tons of customers and then the product will monetize itself, right? So my big question is, is there a slider bar here? If you slide the slider bar all the way to the left, there’s the Atlassian model, and there’s very little sales, And if you slide your slider all the way to the right, then it’s just direct sales and no marketing. And then the question is, what does it look like in the middle? Because you look at it like the slider bar is all the way to the left, and I look at like the slider bar is all the way to the right. But more and more, we’re seeing companies that actually they’re very interesting on both sides, but they’re not classic on either.

Andrew: Totally.

Martin: So let’s assume we take the case of the slider bar as all the way to the organic growth and it’s purely horizontal and it’s growing like crazy. So the question is does it still make sense to build a direct sales force? As in, will it increase the unit economics if you do? I think our experience here Slack and with Hub and with many companies is…

Andrew: It’s definitely yes, right?

Martin: Yeah, the answer is yes.

Andrew: Because definitely yes.

Martin: Because that’s how you maximize ACV per customer, because there is a procurement process and just finding the budget and maximizing that is something a human can do much better than a product at this point in sales.

Andrew: Right, and in fact, I think actually even the virally spreading products end up going tilting towards enterprise over time for a really simple reason, which is that with larger companies your cohorts will look better because there’s revenue extension. Because no matter what, when you’re working SMBs, I find it very hard to get better than, let’s say, a 5% per month churn rate. All these little companies keep going out of business all the time, they’re fickle, they have small budgets, etc. And so what you quickly find is you have to go to the big guys, all the budget’s there. And so then that inevitably leads you, even when you’re completely bottoms up, to start building stickier new products for enterprises and add the sales team, add customer service, and all of that. So I think that is the natural trend.

Hanne: my question is when is that happening? Is that happening in tandem all along? Are they sort of naturally that hybrid from the beginning or do they slide along as things change in the company’s cycle?

Martin: Specifically were you thinking about sales when you started?

Russ: No. Not at all.

Martin: The common refrain.

Russ: When we launched DocSend, we didn’t have any background in B2B. So it kind of caught us by surprise and we got a lot of interest that we weren’t able to convert into dollars because we weren’t even charging people. If we could do DocSend over again, I think we could build it in half the time. Because I think this is a new type of company that there aren’t that many examples for.

Hanne: if you were to put that very broadly as like the type of company you mean what is that type of company?

Russ: If you create a business value, like a B2B value for something, you build some product and you release it for less money than you should or free, you’re going to get some usage of it. if you’re creating a B2B value, you kind of picked your target audience, you get your 100 accounts you want to sell it into, and you have people just pound on their doors to get in there.

Martin: You literally start at the top of the list, you go to the bottom, and then you go back to the top of list.

Andrew: And I think when you compare it to consumer…I mean, for most consumer audience-based plays, you really defer monetization for a really long time. Because you have to aggregate this huge audience and then you start talking about, like, okay, let’s look at ad-based models. And so, and you contrast that to these B2B products where you can actually monetize from early on. And in fact, when you monetize it actually unlocks a bunch of paid acquisition channels, and it’ll unlock sales, and it unlocks a bunch of stuff. I think that’s very confusing for people who, you know, they get started and they’re kind of in this consumer products mindset. And so they often end up kind of like, “Oh, how I do grow? How do I increase acquisition?”

Hanne: What are the signs that that’s the right time when it begins shifting, the sort of tipping point where you’re like, “Okay, should I need to pay attention to this?”

Russ: We were just selling some small deals on the side. So I was like, “I think we should hire a salesperson.” So we hired our first SMB AE, and in our first month we’re like, “We don’t think she’s going to sell anything.” And she sold twice what the quota was supposed to be. There was just a lot of money laying around where if you actually talked to someone on the phone and explained it to them, they might have bought one seat before but now they’re going to buy 15.

Martin: Didn’t you have a support collecting checks?

Russ: We had a support person selling a lot of DocSend for quite a while.

Martin: That’s a pretty good indication it’s time to do sales.

Russ: Yeah, that’s another really indicator. Also, now that we’re going a little bit more up market, you actually need someone who’s able to run a good sales process even though they’re not doing the outbound part of it once you get them in the door, running a good sales process, having good sales hygiene, really understanding who your buyer is, you need to do all those things too. So you really need to marry both sides of it.

Martin: Another shift I’ve seen, which is important from a company building perspective, so if you think about direct enterprise sales, the actual lead up to the sale can take nine months to 18 months. You’re working the account, you’ve got an SE in the account and you’re educating them, etc. So with these new companies, often the customer is education themselves, they’re already trying, and so much of the actual total value of the account comes after they’re users of the product. So it’s about expanding the account. So now there’s this very interesting relationship between sales and customer success where a lot of the value is actually being driven by customer success. I don’t think the direct enterprise is used to this model.

Russ: Yeah, we always say, “You win the renewal when you do the onboarding.” And getting everyone engaged quickly with an account really helps with expansion and renewal. When we do onboarding, we have a little raffle. So if you’ve got 50 salespeople at your company and if you send a certain amount of DocSend links externally in the first two weeks, then you’re eligible in this raffle and you get one of three different prizes. It’s like a $200 bottle of whiskey or tequila or Amazon gift card. And that’ll actually…

Martin: What kind of whiskey?

Russ: I also don’t know. But that’ll actually get everyone using the product really quickly, and then they look at that and they say, “Oh, we bought the product for our sales team. Man, we should use this for our customer success team or our support team.” And so they build faith in it and then it naturally expands. Sometimes you need a salesperson involved, but more often than not, customer success is just saying, “Yeah, you can use it for that too.” And then they expand.

Hanne: So I want to get into the timing question of when, when this starts happening. When you happen into this moment, when all of a sudden you realize, this would be helpful, how do you begin to actually make that happen? What are the signs and signals that are telling you now is the time?

Andrew: Well, I think one really important one is what kinds of companies and people are signing into your service? Where you’re starting to see both prominent tech companies as well as Fortune 1000s just signing up to try it. Even on a purely bottoms up basis, you create the funnel from signing to using a contact enrichment service and starting to score all of these new users that are coming in. And if you find out that a large proportion of them are actually enterprises, that’s actually pulled demand from the market that you should actually be up leveling faster.

Russ: One of the things we actually did to spread that awareness faster is we decided that marketers will send off tons of things to people, so why don’t we just support the marketing use case? Not because we make more money from that. If we power, for instance, a researcher port for a company, they’re sending that to tens of thousands of people that then get exposure in lots of areas that we weren’t even in before. So it really kind of allows it to hop into other places, and then we generate more of that demand coming in. You need to take a look at who’s signing up for your product and you need to think about what might they be looking for and what problems might we be able to solve for them?

Andrew: Another thing I might add is what kinds of feature requests folks are having. If you’re building something that’s like an email client, something that is really horizontal or it’s a new document editor, everything’s great and all of a sudden, you start getting these future requests for Salesforce integration, and you’re like, oh, okay, this is like a different…

Russ: Another request we’ve always gotten has been DocSend, you can’t actually send anything from DocSend and it’s really nice to be able to send from email and customize it, and there’s a different philosophy around that but we were thinking, like, “Man, just let people send stuff right from DocSend. Because then it’s got a DocSend email that they get.” And so it’s actually a good growth thing, as well. So you can, kind of, reprioritize your product list based on how much it’s going to spread awareness about your product outside of the company, which is a great lens for every company to use when thinking about trying to make these viral loops go faster.

Hanne: That’s interesting. Okay, so say ideally you do have this kind of blended model going on. Are there conflicts ever in the types of information that you’re getting from the different sources?

Martin: At the highest level, I think there actually are a lot of conflicts in these motions and in a number of areas. And the most obvious one and this is something that’s so prevalent in open source is, a good way to get organic growth is to give something away for free. And if you give it away for free, it may be hard to monetize it because a lot of the assumptions here are predicated on organic growth, there’s always an open question of how much do you give away versus how do you monetize it? Enterprise really is all about monetization because there is no conversion between eyeballs and dollars like you do in kind of more advertising-like domains. And so there’s a real tension there.

Hanne: So how do you think about that balance?

Andrew: It’s sort of funny because it sort of implies that you can go one way and not the other. Meaning, if you have a product that’s making a bunch of money and you have a highly functional sales team, and then a product person in the org is like, “Hey, let’s have a free offering,” that is not going to happen. Versus the other way where you have something that’s product led and it generates a lot of users and then you build this whole pipeline off of that and you build the sales org. If you do it in that order, all of a sudden the freemium product actually feels like it’s actually very helpful. Nevertheless, eventually free tends to go away or become pretty crippled as the whole business evolves. But freemium can be so disruptive in these industries because if you’re a large enterprise, B2B software company, you’re not going to be able to do this kind of low end free offering.

Russ: Yeah, a lot of what we’re talking about is just pricing and packaging which is something that’s so hard for everybody. because you’ll look at a company and you’ll look at their pricing and packaging, and you’ll be like, “Congratulations. You’ve done it.” But then when you look at a new company and be like, “What should their pricing be?” Everyone’s like, “I have no idea.” And it’s hard because you can’t AB test it. And so you have examples of what’s worked but it’s really hard to predict what will work for any given business and so you could say on the low end, we got a free thing. On the high end, we got an enterprise thing. And then maybe there’s something in the middle.

We actually just increased the pricing and added a couple new plans. And we thought the conversion would come down but we’d make more money. What happened was that conversion went up and we made way more money.

Hanne: And why do you think that was happening?

Russ: We moved some features around and then we talked about the plans differently and who they’re for. And so people also trusted it a bit more because they’re paying more for it. People then value it more and actually use it more because they’re paying for it.

Andrew: Right. Well, I mean this is the difference between also when Netflix increases their monthly subscription by $2, everyone’s screaming bloody murder. And B2B is obviously less elastic.

Hanne: “Oh, it must be good.”

Andrew: There’s some price signaling as well.

Martin: But it’s also important to compare it to traditional pricing and packaging. the general model used to be when you first come to market, you are as expensive as possible and you know you’re going to go for a limited set, but ACV is high enough to cover it. And the sales cycles are long anyways. And then after you feel like you’re saturating that, you offer lower priced units so that the aggregate market is larger net cannibalization. So you don’t want to cannibalize yourself. And the way you do this is market research of existing customers, you know the target customer base, and you can AB test. You can actually do fairly small rollouts because it’s not marketing led.

That motion is lost in this world because basically, as soon as it’s publicly available for free, everybody knows about it and it’s very difficult then to kind of retract that. So you have to be very thoughtful about pricing and packaging upfront because any experiment basically is reality now. And that’s very, very different from the traditional enterprise motion. I mean we experimented with pricing so much in the early days and the only thing you had to hold sacrosanct was price very expensive early on because you’re only going to get 10 customers anyway and you just can’t do that motion now.

Andrew: Even the way that you do pricing, it can potentially impact engagement. Where do you put your pay wall? Is it a time-based trial, is it a usage-based thing? those things become really important because, especially when you have a product that is growing virally, it’s building a network inside these companies, you don’t want to cut off the network prematurely, because the network is what makes the whole thing sticky. So for example, it would not make sense for a product like Slack —
if they were like, “Well, we’re going to cap the number of people that can join the channel to five,” that doesn’t make sense because the entire network effect is based on having all of your colleagues there. So what you end up wanting to do is you’re gaining these features that the IT admins want, and those are the things that end up being how you differentiate the enterprise customers from purely the consumer ones.

Hanne: When you start thinking about forecasting or planning, do you ever get competing signals and information from this blended model where you’re doing two different kinds of growth and sales?

Martin: Well I think this is a really interesting question of…for wherever you are in the lifecycle of the company, let’s say you have $1 to spend on go to market, how much of that $1 goes to brand and marketing, versus how much of that $1 goes to sales? And that is a question I don’t think anybody knows the answer to.

Hanne: But what are some of the ways you start figuring it out?

Martin: The traditional view in the enterprise is you spend it all on sales, basically, until you’ve got a working pipeline or a repeatable sale. Then you have economics you understand and then you start increasing the top of funnel. That’s the traditional model. But now, we’re marketing led. And so, how do you know how to split those dollars up and when to do it?

Russ: A lot of it has to do too with the DNA of the founding team. my two co-founders and I are all engineers and product people. And so we’ve basically used our product as the marketing engine for the company so far. We haven’t done any paid acquisition, we haven’t been doing a lot of marketing stuff that’s been driving a lot of the top of the funnel. The product itself is driving the top of the funnel.

Hanne: But that would be what most of these companies are doing kind of? In this kind of company, that would be common?

Martin: Well, okay, I mean there are a number of companies that will actually just buy their users. I’m totally not used to that. Andrew’s totally used to that. And so this is kind of…

Andrew: …Yeah, and I hate it. Yeah, there’s folks that they’re spending tons and tons of money on Facebook, on Google, etc. That’s very common. The other one as well is a huge focus on content marketing as being one of the primary channels I think that is really different.

Russ: It’s kind of going back to what we said earlier where, should companies invest in sales? And my view on that would be, if you show me a company that’s growing organically, I’ll show you a company that’s performing better if you also add a sales team to it. If you can get it working with the product, you can actually probably get a good baseline of growth, but you should probably spend more on marketing and sales on top of that. And if you can get the unit economics anywhere near reasonable for a paid acquisition, you should probably put everything you can into that channel, knowing it’s just a component of your overall strategy.

Andrew: The thing that makes it hard to normalize a bunch of these efforts is they happen on very different time scales. You can literally increase your paid acquisition budget and see a spike in signups and self-serve conversions within a 24-hour period. If you’re going to go and hire and build out your sales team, it’s going to take you months to build the team, and then months to recruit them. But when the revenue hits from these really large contracts, it’s huge. Hopefully, you have multiple systems that are mutually reinforcing each other as opposed to feeling like they’re in conflict. But that certainly happens if you are trying to figure out, where do I put the next dollar?

Hanne: I mean, what are some ways around dealing with that discrepancy between timeframes and planning and forecasting when you’re trying to match up these two very different chronologies?

Martin: I don’t think there’s any recipe. There’s never a recipe to doing a startup anyway. There’s no recipe to find product market fit. I don’t think there’s any recipe to knowing what’s the right balance between growth and sales and when to do it. But here are things that a founder should think about that has traditional enterprise expertise in the new world. The first one is brand. You normally don’t think about brand, but brand does drive viral growth. Product focus, right? The product itself actually creates virality. The enterprise very rarely thinks about, believe it or not, product. They think more about solving problems.

Hanne: Really? That’s so surprising.

Martin: It’s not about making the product “delightful” or easily consumable. It’s solving a real problem and adding business value and less about consumability, right? Now you have to think a lot more about consumability, like single-player mode, like self-service mode. Right? Very different than traditional enterprise. You need to design your company for bottoms up growth whether you’re open source or you’re doing SaaS or whatever, because this is the new method of consumption. And I do think that the one most important is if you’re doing bottoms up growth, I think you have to expect a lower ACV which is a different way to build a sales team. And so you just have to be more comfortable with your inside, inside/outside models and then you have to be more comfortable with focusing in on expansion rather than upfront ACV.

So these are all very, very different than the traditional enterprise.

Hanne: They’re sort of mind shifts.

Martin: They’re all mind shifts.

Andrew: There are new organizational structures that end up being built within these companies that sit alongside sales because all of a sudden, you can have multiple revenue centers, right? And that’s a very different approach. Then the people that you hire for this end up being designers and PMs and engineers that are kind of this business-y, metrics focused folks. Going back to Dropbox, I know the most recent incarnation were sort of biz ops people turned PMs that were previously working oftentimes in consulting or banking.

Hanne: So it’s a new hybrid kind of role in organization as well that comes down from this?

Andrew: Right, exactly.

Hanne: That’s interesting.

Andrew: Do you want to hire the nth engineer into this team that can run a whole bunch more of these AB tests? Or do you build out your sales team more?” These are the kinds of decisions that these companies have to make these days.

Hanne: Russ, did you see that as well that kind of hybrid role?

Russ: Yeah, there are a lot of things that aren’t just salespeople calling and getting contracts signed. Enterprise sales is like a playbook that makes sense. For the bottoms up company, you’ll see this perfect curve and kind of the outside view of that is they did something brilliant at the beginning and then everyone went on vacation and it just kept growing. But in reality, behind the scenes is a series of every smart things you did to keep that growth going. And what got you from A to B is not going to get you from B to C. So you often have to do redo your organization, you have to add in new roles, and you have to recognize when you’re going to hit points of diminishing return for a type of investment. And you have to get ahead of that and say, “Well, what’s the next type of investment we’re going to be able to do to get us to the next stage of things?”

Hanne: Add on another layer, right?

Russ: Right.

Hanne: As Jeff would say.

Russ: Yeah, it’s different for every company. There’s no one right answer.

Andrew: The really important key thing is the importance of not just a great product but literally great user experience and design, and all the fit and finish that you would expect with a completely modern consumer-facing application.

Hanne: Now that’s coming to this world too.

Andrew: Right, exactly. Like, Envoy, that is an amazing B2B viral story. They’re very rare, But the reason why people use that now is because offices are part of the brand experience. And then after they use the thing, then they’re kind of like, “Oh, yeah, we’re using pen and paper back at the home office. We need to upgrade to this too.” These examples crossover both the consumer sort of design world, all the way to sales, all the way to performance marketing. You really have to leverage a lot of skills in order to execute these strategies.

Russ: The expectation for the usability of software I think is going up in enterprises. Larger companies expect more polish and more usability. And if it’s not there, they start to really worry about it being shelf-ware or not the value proposition. And shelf-ware is a pretty big problem at a lot of big companies.

Andrew: One of the funny anecdotes at Uber was that for a long time, we were officially on Hip Chat but there were so many teams across the company that would have their little secret Slack team chat going because they just didn’t wanna…

Hanne: Illicit Slacking?

Andrew: I feel comfortable saying that now that Hip Chat’s been shut down. employees will literally rebel and use whatever they want. And so as a result, as companies selling into these, your products have to be really good to compete with everything else that’s out there.

Martin: I didn’t understand how powerful actually just growth tactics were. independent of product. Actually independent of sales. Andrew, you and I were looking at a company which was amazing. Like the growth was amazing. Like all of these numbers were amazing. The engagement, they were monetizing, like everything looked great and the conclusion we came to was, like, it’s because they just had, like, such an amazing growth team that was almost independent of the product that they were selling.

Hanne: Oh my gosh.

Martin: We literally came to the end and we’re like, “Wow, this could be anything. This could be, like, you know, dog food. This could be, like,

Hanne: Doughnuts.

Martin: Yeah, whatever if you figure out how to do it right, it’s a very, very powerful thing. And by the way, that used to be what you said about sales. What you used to say about sales is if you have a very good sales team that understands the buyer, you know, it’s kind of independent of product.

Hanne: Awesome. Thank you guys so much for joining us on the a16z podcast.

Group: Thank you.

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