Sales is either SMB or enterprise - there is no midmarket
- SMB and enterprise selling are two radically different motions. SMB is typically powered by marketing, whereas enterprise is typically sales led
- Mid-market can be taken to mean either smaller end of enterprise or the bigger end of SMB — both of which will have radically different selling motions (and will impact the type of people you need to hire, the sales cycle, the ACVs)
Start by selling to Tier 1 logos, don’t build up to it over time
- Tier 1 enterprises (i.e. logos who are the leaders in your space) can actually be early adopters because they are always looking for alpha in order to remain in the number one spot. This can translate into a higher willingness to be an early adopter of a new tool
- This rings true even more in the age of AI
How do you sell to an enterprise Tier 1 logo?
- For pulling off a Tier 1 enterprise deal early in the company’s life, founder-led sales is critical. This is because founders more naturally sell the vision - and with such deals, it’s critical to sell the vision, not just sell a solution to a problem
- To get a Tier 1 logo excited, you need to be selling the vision. The way to do this is to pitch how your product can unlock something important for them - unlock a new source of alpha, a new way of thinking, a new and unique opportunity for them
- As an example, the pitch for high frequency trading is that you get 1 second of alpha before everyone else
- In the age of AI, selling the alpha is even more important
Be bold and aim for large ACVs. Don’t discount
- Aim for big ACVs, don’t discount. A customer who will only buy after a long negotiation on discounts is not fully bought in on your solution
- Enterprises aren’t going to do the hard work of bringing you in as a vendor unless your solution is mission-critical. This is why selling to enterprise early can actually be a powerful litmus test to know you are building something valuable
- Enterprises are structured in a way that makes it hard to buy, because they want to make sure that the sponsor is only bringing in solutions that they have a lot of conviction in. This gets rid of “good not great” propositions
- It’s much harder to get a $100K deal done than get ten $10K deals done. But to get a $100K deal done requires an executive to sign off — which can be a very powerful place to be in
- If you are a PLG company and you are selling to an enterprise, be careful when selling SMB pricing to a large enterprise (e.g. 3 users from Walmart sign up and are paying the usual seat price x 3. Now if they want to expand to 100, they will anchor on the price per seat they were paying. You aren’t getting senior executive buy-in if you try and bleed these two approaches).
- Don’t try and ramp up a deal from $10K with a view to getting it to $100K - it’s just not feasible. You should be building the product that you can sell for $100K
- Enterprise companies are very used to a “land” ACV of $75 - 150K. Don’t try and land at too small of an ACV (it’s hard to defend a 10x jump in price, because it’s hard to show you are delivering 10x the value)
When does it make sense to sell smaller ACVs?
- When you have a super high win rate and a massive market
Design partners
- Treat them as a guide to your space/product
- Design partners are the hardest to upsell to becoming a full fee paying customer. Nonetheless, you should ask for them to have some skin-in-the-game
Enterprise sales is very creative
- Speak to very specific alpha, vision cast, better understand the problem than the market does
- It’s all about deal crafting — they need to feel that the value they are getting out of it is way more than the cost
- Sometimes you can give away parts that aren’t valuable to you, but very valuable to the customer (e.g. building out a specific integration for them)
- Don’t become a comparison amongst tools — it’s all about differentiation.
- “Here’s what you’ll be able to do tomorrow based on how we’ll serve you today”
Services are a good wedge into enterprise sales (i.e. Palantir FDE model)
- Enterprises are very used to buying services (more than buying software)
- If they have an immature way of understanding a problem or haven’t purchased technology to solve it — in which case selling them a service is the fastest way to get a foot in the door
- Obviously, you need to then quickly guide them towards the product
Channel partnerships
- Are unlikely to work, because you are one of many partners
Getting stuck in procurement
- Usually happens because you aren’t speaking to a senior enough person (which is why an executive should be involved)
- This is also why aiming for bigger ACVs can be valuable because it will require executive buy-in, which can itself help in pushing something through procurement
Other points
- $1-10M requires more than founder-led sales
How to hire a good enterprise sales rep
- For enterprise sales, you want reps who can cosplay the founder
- Very difficult to get sales reps who’ve sold small deals to do enterprise sales. You need to understand how corporations buy, how executives think, and understand an enterprise’s ability to take on risk
- Hire former founders if you can
- Less about experience, but more about whether you want to buy from this person
- Do they mimic the market they are selling to?
- Executives typically want to speak to other seasoned people
- Typically 1 in 2 salespeople get fired. It’s hard to hire good sales reps
- Sell the vision
- SMB sales
- Getting through procurement
- What to look for when hiring sales reps