In the old software world — think Oracle and SAP — sales were the competitive advantage. Today, we live in a world of product-led growth, where engineers (and the software they have built) are the biggest differentiator. If your customers love what you’re building, you’re headed in the right direction. If they don’t, you’re not.
However, even the most successful product-led growth companies will reach a tipping point, because no matter how good their product is, they’ll need to figure out how to expand their customer base and grow from a startup into a $1 billion+ revenue enterprise.
The answer is the hamburger model. Why call it that? Because the best go-to-market (GTM) strategies for startups are like hamburgers:
- The bottom bun: Bottom-up GTM.
- The burger: Your product.
- The top bun: Enterprise sales.
In the hamburger GTM model, your product is the meat. We’ll go through each layer before talking about some of the best ways to implement the model successfully at your company.
The hamburger model
The meat — product at the center: The hamburger model starts with a great product. As a founder, this means you don’t need to think about revenue on Day One. You do, however, need to obsess over your customers, what they want and how to build it. Nothing is more important.
The bottom bun — users not leads: In a top-down sales model, marketing creates leads that are then converted into sales by enterprise reps. In a bottom-up model, marketing creates users, not leads, and those users are never touched by sales. For companies that have been customer-obsessed from the very beginning because they built something people love, this bottom-up model can feel far more natural and fuel a successful business.
The top bun — building enterprise sales: Even the best bottom-up sales models aren’t enough on their own, and every company eventually needs top-down sales. It may sound counterintuitive, but even the companies most famous for their bottom-up approaches now have enterprise sales teams. That’s because there are certain types of customers — for example, healthcare, insurance and government — that require salespeople to engage with due to compliance and security reasons.
The hamburger go-to-market strategy. Image Credits: Coatue
These are the basic elements of the hamburger GTM model: A killer product that sets you apart, a bottom-up sales strategy to convert users into paying customers, and a sales team to go after bigger customers that require more attention.
Assembling the perfect burger, or perfect sales model, is more complicated than it sounds, though. Here are some of the biggest do’s and don’ts:
Avoid the messy middle: The gray area of hybrid bottom-up and top-down selling is in the middle. When you get an introduction to a large, global enterprise, it’s very clear that you need to bring a salesperson into the conversation. Likewise, when a five-person startup signs up on your website, you know that company should ultimately convert with a credit card. But how do you handle deals that are less clear-cut? Who should be responsible for a prospect with a few hundred employees? A few thousand? What about a big brand name with a small team signing up? Where do you draw the line?
These questions become even more important when you have different stakeholders responsible for different motions, each with their own incentives. Do you give the lead to sales (they always want it), or leave it to customer success (who will rarely fight for it)? Is the prospect to whom you are talking to a free user or a lead? What’s the difference?
In this danger zone, our instincts are often wrong. It’s easy to hand the prospect over to the sales team since they are the loudest voice and represent the fastest path to revenue. But this risks both distracting your sales team, which should be focused on larger prospects, and giving the customer a suboptimal experience.
In practice, a good rule of thumb is: If in doubt, try bottom-up. Make sure your bottom-up user experience is simple and straightforward. You want to be the easiest company to get started with.
Treat your community right: A community is incredibly valuable, but cultivating one is complicated. Communities are about connection over a long period of time, not one-time transactions. It’s why one of our portfolio companies, OrbitLove, is helping to pioneer a “go-to-community” model that treats end users (not leads) as first-class citizens and focuses on creating great experiences that can help convert users into paid customers and external promoters/advocates. For a deeper dive, see this Orbit blog post.
Build a champion network: How do you convert smaller customers into larger ones over time? Instead of trying to pull midmarket deals into an enterprise sales cycle, focus on turning users into champions and letting them bridge the gap for you. IBM’s adoption of Slack is a great case study. For companies with hybrid motion, that means cultivating a network of champions who can share ideas and serve as advocates within their own companies, offering a path to moving a small team to an enterprise deal.
Use pricing as a growth lever: In the hamburger model, pricing can be an important lever for growth, but only if you align price with customer value and create natural on-ramps for customers to pay you more over time. This often means a usage-based pricing model, which is increasingly popular for product-led growth companies. (We covered this in our mao pricing post.)
In such a pricing model, it’s important to ensure each pricing tier adds more value. For example, the paid tier should be attractive and different enough that customers don’t stick with your free plan forever. On the flip side, the enterprise tier cannot be so expensive that these customers (who drive most of your revenue) feel like they are getting the short end of the stick.
Practice “just in time” sales expansion: If your product delivers what people need as soon as they need it, you can create “just in time” moments to upsell a customer. The idea is simple: As a customer, would you want a salesperson to call you about an “adjacent product” at a random time? Or would you prefer it if the product itself sensed that you were trying to do something different and offered a solution?
The features, functionality and breadth of your product should unlock the next use case and a path to incremental monetization, creating a virtuous cycle where product innovation is directly tied to expansion. If your products can solve problems “just in time,” both you and your customers will win.
Rethink your executive team: A strong chief revenue officer can often be instrumental in bridging the bottom-up and top-down sales motions. Great CROs will put the right infrastructure in place across sales, marketing and customer success to align incentives and create clear boundaries. More companies are also hiring chief customer officers who help align the entire company around turning users into champions. Our “who, what, when” post covers the role of nontraditional, nonsales organizations in bottom-up GTM.
Balance product development: Serving both “buns” can be a product development challenge. For the bottom bun to be successful, product and engineering need to focus on self-service, simple billing and viral features. For the top bun to work, product and engineering often need to focus on compliance, SSO, user admin and reporting features.
Managing the pulls from both ends can be an issue. In many cases, engineering gets put toward the top bun because the teams are more vocal in their needs and the dollars are bigger. But long-term success requires striking a better balance and an equal focus on the needs and success of the bottom bun.
Know when to build the other bun: If you’re growing fast and have a bottom-up selling motion that works, it might be time to start hiring a sales team. Many companies wait too long to start building out their enterprise sales and end up ceding market share and ultimately failing to build the organization they need to achieve their potential.
Similarly, if you have a strong sales team (or a few killer salespeople), think about creating a more natural on-ramp to your product — something users can “try before they buy” and adopt with lower friction. And start now, since launching a free or cloud product often takes significantly more time and effort than most companies expect.
Usage-based models are different: Many companies are now implementing usage-based pricing instead of SaaS licensing. In the usage model, what are your sales executives even selling? You will likely need new packaging to give them something concrete to sell, even if it’s in the form of a yearly usage commitment or number of credits.
The same is true for compensation of your sales teams. Sales compensation is easier in SaaS models than usage-based models. In the latter model, you have to create incentives to land many small deals versus a few big whales — like creating monthly payouts over quarterly goals and additional incentives for hitting certain new logo targets.
In this model, the hiring roadmap also needs to be different. For example, you often want to start with hiring sales development reps, then sales engineers, then account managers and lastly account executives. Unlike a traditional sales model, you will want to compensate your “farmers” (customer success) with quotas and commissions, not just your “hunters” (sales). In a usage-model, the goal is to land many small customers quickly, knowing that your product itself will drive the upsell motion.
Be aware focusing on the different parts of the hamburger model at the same time is hard. It requires more time and resources, and there are plenty of reasons to put off building one bun when the other is working. But having both can help set you apart and help you achieve your potential, so don’t delay too long.
Conclusion
Whether they start with a top-down or bottom-up sales strategy, most companies eventually need to transition from a single-sales motion to a hybrid approach, allowing them to engage with all types of buyers and customize their customers’ purchasing experience to their needs.
The hamburger model combines the best of two separate methods and can help provide a path toward achieving $1 billion+ in revenue over time. Like a hamburger, the meat (your product), is the most important element, but it doesn’t work without the buns (bottom-up and top-down sales strategies). This is no keto diet!
In the end, however, the effort is worth it. Your product will create users, your account executives will work to close $1 million+ deals with complex buyer personas, and happy users will turn into champions, helping bridge the gap between early users and enterprise-wide rollouts. It’s a recipe for a delicious burger and an incredibly successful company.
Disclaimer: The information contained in this article should not be considered investment advice from Coatue. As of the date of publication, please note that Coatue currently has a private investment in Orbit, which is referenced in this article. As of the date of publication, please note that Coatue may or may not hold positions in the public companies referenced in this article and that other than in publicly available SEC filings, the federal securities regulations limit Coatue’s disclosure of public stocks in which it is invested.