Ali Mitchell
In times of (capital) abundance, startups can afford to overbuild their sales teams, hire the wrong sales leaders and invest resources in sales strategies that don’t pay off.
It’s not a good idea, obviously, but exuberance reigns and funding will flow. But in times of hardship, when belts are tightened and words like “burn multiple” revisit boardroom dialogues, getting go-to-market (GTM) right is critical.
People talk a lot about building the wrong GTM model, so we won’t belabor that topic, its importance notwithstanding. But we often see a different mistake: building the wrong GTM model for the current stage of a startup.
In a downturn, getting the timing and evolution of a GTM model right relative to the maturity of a business can make the business and getting it wrong can break it.
Here’s our view of what to do and when to do it.
Stage 1: Product-market fit (seed stage)
Startups that are just launching a product have two paths they can follow:
- Try to sell your product to 100 people you think would be potential buyers. If not enough of them want it, iterate and keep going until you hit a bull’s-eye. This works better for an enterprise product, where there is a group of buyers you know already or who are easy to identify. The upside is, you’ll get a very clear message back. But the downside is, the message may be that you’ve gotten it wrong.
- Alternatively, market your product broadly, get as many people as possible to use your product, then work out where your hits are. This only works for a self-serve product. You can look across a large number of individuals using your product and find your best pockets of users: Who’s active? Who shares your product? Who’s converting?
Stage 2: Pricing and profit (seed to Series A)
You’ve found some customers who are willing to pay, but how much should they pay, and how long does it take for them to decide to buy? This is key: If you get your pricing and buying cycle wrong, you’ll get your entire GTM model wrong.
Startups always undercharge. We think that if you’re winning on price point, you’re not winning at all, and you should stay in Stage 1. Triple your prices until someone says, “I’m not buying this because you’re 10x more expensive than the next-best solution.”
Once you’ve figured out pricing, you can figure out if you can build a profitable GTM model. Does your pricing support a top-down guided sales model? Or is your pricing more aligned to a product-led sales model?
If you have a product that requires a lot of sales and support, but your price point is so low that you can’t afford the sales team and buying cycle, then you don’t have product-market fit. Go back to Stage 1.
Stage 3: Do things that don’t scale (Series A)
We often see startups with some early successes hire a team and/or build product flows without first validating that things are really working.
In this stage, sales should still be founder-led; don’t “scale sales” yet, because you need a playbook first. That playbook should be a single sheet of paper describing the exact steps — in an enterprise sale or in a product-led strategy — that lead to revenue every single time.
We’re exaggerating, of course; nothing works every time. But don’t be afraid to do things manually for longer than it feels comfortable.
For enterprise, keep things simple: Hire two AEs and get them productive enough that if a new rep were to copy them exactly, they’d land a sale 90% of the time.
As for product-led approaches, don’t overspend on engineering to create complex product flows that may not work. Don’t build your onboarding flow, for example, unless you can run 100 users through it and at least 90% of them follow the “correct” path.
Once you have the first version of the playbook, hire two reps to follow it or onboard your next cohort of users. If that works, then you can move on to the next stage.
If you can’t build a repeatable playbook, go back to Stage 1.
Stage 4: Pipeline (Series A to Series B)
Now can I “scale sales,” you ask? Not yet!
Before you start scaling any kind of sales model, you need a pipeline to support it.
Many companies plateau here. Your early adopters were likely searching for a solution and willing to try new things. They were somewhat self-selecting, didn’t need much selling to and were likely flexible on features. But you can’t extrapolate what happened with these early adopters to the next cohort — what we call the “early majority.”
The early majority aren’t looking for you — they have the problem you’re solving, but they don’t know it, or they don’t know you’re the solution. As you market more widely, you’ll find prospects who have the problem you’re solving and a lot of other problems as well — they’ll want different or more features.
As a result, you’ll need to be precise with your marketing and while communicating what your product does. You’ll also have to maintain a high bar for sales velocity, which requires turning down a lot of customers.
Once you’ve figured out how to generate a stable pipeline, then you can hire someone to scale sales.
Stage 5: Support and services (Series B)
With sales in scaling mode, you need to build the rest of the commercial team. Any commercial team involves some combination of new business (sales), support (technical), success (engagement and usage) and account management (growing existing accounts), and that’s typically the order in which they get added. Enterprise-facing businesses can also have consulting or professional services teams.
Stage 6: Start over (Series C)
As your business matures, you may decide to enter new markets or build new products. You may layer on a bottom-up strategy after your enterprise sales motion is already established or vice versa. Regardless of whether you’re selling a new thing to the same users or selling the same thing to a new group of users, your product-market fit changes. Go back to Stage 1.
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