Lenny's Newsletter · Product & Work
TIER 5 2021-08-24
> ## Q: I’m building a B2B SaaS startup and I’m trying to decide which market segment to go after (e.g. Mid-market, Enterprise, etc.) and how to get to them (product-led vs. sales-led). Do you have any advice? Product-led, bottom-up, top-down, Mid-market—so many buzzwords, and so many options. Yet going after the wrong segment, with the wrong strategy, could set your company back months, if not years. And startups have very little time to spare. Since I’ve never built a B2B SaaS startup myself, I don’t have firsthand advice I can confidently dispense, but what I can offer instead (and is likely more useful) is **a thoroughly researched first-of-its-kind breakdown of how 30 of today’s fastest-growing B2B SaaS companies approached their GTM strategy**. Below, I’ll share who companies like Airtable, Datadog, Figma, Notion, and Stripe went after initially, how they went after them, how that changed over the years, plus five illuminating takeaways that emerged from this research. But before we dive in, let’s first define some terms. #### **Product-Led Growth vs. Sales-Led Growth** - **Product-led:** The product is self-serve (with a freemium or trial offering), and users become customers after using the product on their own. They also generally discover your product through SEO, ads, or referrals. This includes companies like **Figma**, **Datadog**, and **Airtable**. - **Sales-led:** The product requires someone from the company (usually a salesperson) to onboard you, and new customers generally try the product only after a salesperson reaches out. This includes companies like **Workday**, **Snowflake**, and **Salesforce**. #### Top-Down vs. Bottom-Up - **Top-down:** You go after leaders (e.g. execs, VPs, heads-of) within the organization, who buy and spread your product throughout the company top-down. This includes companies like **Workday**, **Carta**, and **Square**. - **Bottom-up:** You target individual contributors within a company, who spread the product bottom-up, eventually enabling you to sell and expand the product companywide. This includes companies like **Datadog**, **GitHub**, and **Coda**. #### Other terms - **Sales assist:** A sales team helps close and expand larger accounts that primarily come through a product-led motion (vs. outbound sales). - **Bottom-up lead gen:** A sales-led company with a self-serve product that is primarily designed to drive leads to the sales team (not generate revenue). #### Business segments - **VSB (very small business):** <10 employees - **SMB (small or midsize business):** 10-99 employees - **Mid-market:** 100-1,000 employees - **Enterprise:** >1,000 employees *🙏 A HUGE thank-you to everyone who helped me with this post: [Ann Montgomery](https://www.linkedin.com/in/annmontgomery/), [Bri Kimmel](https://twitter.com/briannekimmel), [Brian Balfour](https://brianbalfour.com/), [Cailen D’Sa](https://www.linkedin.com/in/cailen), [ChenLi Wang](https://www.linkedin.com/in/chenliw), [Jackie Bavaro](https://www.linkedin.com/in/jackiebavaro), [Jamie Quint](https://www.linkedin.com/in/jamiequint), [Jeff Chang](https://twitter.com/jeffchang30?lang=en), [Keenan Rice](https://www.linkedin.com/in/keenanrice), [Kenny Mendes](https://twitter.com/kmendes?lang=en), [Nate Abbott](https://www.linkedin.com/in/naabbott), [Tai Rattigan](https://www.linkedin.com/in/tairattigan), [Tom Preston-Werner](https://twitter.com/mojombo), and [Zoelle Egner](https://twitter.com/zoelle) 🙏* ### Top five takeaways: 1. 100% of product-led companies end up adding a sales team, if not going sales-led completely 2. Everyone moves upmarket—few go the other direction 3. Almost everyone starts by going after VSBs or SMBs (aka startups) 4. Everyone targets one (and max three) personas within an organization 5. Sales-led companies often add a bottom-up self-serve product, primarily to drive lead gen Let’s dive deeper.  ### 1. 100% of product-led companies end up adding a sales team, if not going sales-led completely Of the 30 companies I looked at, 19 of them started off product-led, but *100% of them* added a sales team to assist with growth/expansion. Four completely switch to a sales-led motion. Interestingly, zero went the other way (from sales-led to product-led). Why does this happen? Well, one reason is that most products can’t achieve lasting wall-to-wall adoption without a high-level decision maker signing-off: > #### “Some companies (Slack, Airtable, Asana, Notion, Figma) can get pretty huge and still work with self-organization—you don’t need a VP of X to ‘roll out’ Slack and force everyone on. It just happens. But many SaaS subverticals are ‘all or nothing’: you can’t use two equity management products, customer support tools, or HR systems. For these, generally there’s a single decision maker who’s better reached via sales-led motions vs. product-led.” > > #### —[Nate Abbott](https://www.linkedin.com/in/naabbott/), Head of Product at Front Another reason companies go upmarket is that venture-scale businesses need to keep growing, and to keep growing you need to find bigger dollars. Which means going after larger companies. And once you get to Mid-market and Enterprises, you need humans to sell, educate, and win deals. Which means a sales team. > #### “Initial growth at successful early-stage bottom-up companies is often the result of a product-driven flywheel: The product’s value and appeal drive individual user adoption, which in turn drive viral momentum through word of mouth, while product upgrades and individual usage often lead to team adoption. > > #### However, as products proliferate through an Enterprise customer, there’s a limit to the users who want or are able to discover, use, and pay for it on their own. As the company starts to scale, relying purely on self-serve often results in an asymptotic flattening of the growth curve, resulting in linear or worse, declining growth.” > > #### —[Sarah Wang and David George](https://a16z.com/2020/12/03/adding-top-down-sales-bottom-up-enterprise-startup/), a16z For companies that completely shifted from product-led to sales-led (e.g. Box, Front, Intercom, Zendesk), I don’t know the specifics behind these shifts, but I hear the transitions were difficult and took a long time to manifest. It took Zendesk 10 years to make the switch. Though I imagine this was absolutely necessary because these products weren’t selling effectively through a self-serve motion. If you’re going through this transition, don’t miss [this post by Pete Kazanjy](https://www.lennysnewsletter.com/p/sales-bottom-up) that walks you through the process of layering on sales. ### 2. Everyone moves upmarket—few go the other direction On the same note, *every one* of the companies I looked at moved upmarket. Sometimes this move was in addition to their initial market, and sometimes they left behind that initial market. A few examples: - **Amplitude:** SMBs —> Enterprises - **Box:** SMBs —> Mid-market + Enterprises - **Datadog:** SMBs —> SMBs + Mid-market + Enterprises - **Gusto:** VSBs —> SMBs - **Slack:** SMBs —> Mid-market + Enterprises Knowing that you’ll eventually need to move upmarket, here’s what my buddy Jeff Chang pointed out when I ran this draft by him: > #### “One thing hidden from this data is many startups successfully sell to SMBs but can’t cross over to Enterprise to get big and don’t end up in Lenny’s Newsletter. It’s good to test for enterprise demand ASAP to de-risk a startup.” > > #### —[Jeff Chang](https://twitter.com/JeffChang30), founder and ex-growth at Pinterest Very few companies moved downmarket, and when they did, it was primarily an expansion into all stages of business (vs. giving up their initial market segment): - **HubSpot:** Mid-market —> All stages - **Notion:** SMBs —> All stages - **Plaid:** SMBs —> All stages - **Twilio:** VSBs and SMBS —> All stages - **Zendesk:** VSBs and SMBS —> All stages > #### “I think the reason companies go upmarket, vs. downmarket, is that starting downmarket requires you to focus on simplicity, to create the self-serve, frictionless motion. It is easier to add things to adapt to enterprise than it is to start complex and then simplify over time. Removing features, flows, permissions, data fields, salespeople, etc. goes against the natural motion of orgs—which is to *add*.” > > #### —[Brian Balfour](https://brianbalfour.com/), founder of Reforge Though you can still get very big without moving far upmarket for many years (e.g. Calendly, Canva, Zapier), what this data tells me is that your initial market is just that—your initial market. Eventually, you’ll be pulled upmarket. ### 3. Almost everyone starts by going after VSBs or SMBs Of the 30 companies I looked at, 21 went after VSBs and SMBs early on. > #### “The conventional wisdom is you don’t go straight to Enterprise. You solve a specific problem first, and then you layer in Enterprise requirements like governance, compliance, etc. They [Enterprises] generally also move slower, so it makes sense to start with more nimble customers first.” > > #### —[ChenLi Wang](https://www.linkedin.com/in/chenliw), GP at WndrCo, ex-growth at Dropbox, Workday Only three (Workday, Snowflake, Databricks) started out focusing on Enterprises, and only two (Retool, HubSpot) started out focusing on the Mid-market. So how do you know where to start? VSBs or SMBs are the safest bet at first because these companies can make faster decisions, there’s less compliance/security risk, and you won’t need a robust sales team immediately. They are also more likely to be the early-adopter types. > #### “In most markets, the SMB segment is varied enough to allow a startup to win larger and larger customers every quarter without making the leap to Mid-market or Enterprise. While it’s a long way to the top, a rapid ascent upmarket for an SMB SaaS business can be both unnecessary and destabilizing.” > > #### —[Adam Fisher](https://www.bvp.com/atlas/moving-upmarket-and-the-ascent-of-smb-saas), Partner at Bessemer Venture Partners How do you choose between VSBs (i.e. super-early-stage startups) and SMBs (i.e. somewhat more established startups)? Three pieces of advice: 1. **Default to SMB.** Practically speaking, you should prioritize customers who are likely to survive, and very-early-stage startups are not known for their long-term survival. 2. **Follow the pain**. Which scale of company, and who at this company, is most feeling the pain you’re solving? The more pain, the easier the sell. 3. **Find the early adopters**. Who is most likely to give your newfangled, half-baked, hard-to-trust, product a try? Is it engineers at VSBs? Eng managers at SMBs? Helping a few of them be successful will provide social proof to future, less-early-adopter types. You can also experiment with both segments to see where you feel the stronger pull. Zooming out, it also sometimes makes sense to go straight to Enterprise. My take is that you do this **only if the pain point you’re solving is specific (or** ***far*** **more acutely felt) within Enterprise businesses**. For example, scaling your data workflows (e.g. Snowflake, Databricks), keeping tabs on your quickly expanding team (e.g. Workday), tracking leads (e.g. HubSpot), staying in compliance (e.g. Vanta), procurement, etc. are Enterprise-specific problems. Winning here out of the gate becomes a huge advantage if you can pull it off, but it also requires a patient sales-led GTM strategy. If you’re going down this road, don’t miss the book *[Founding Sales](https://www.foundingsales.com/)*. ### 4. Everyone targets one (and max three) personas within an organization Everyone I looked at, other than Dropbox and Notion, had a very specific role or function they targeted within organizations, right out of the gate. For example: - **Amplitude:** Mobile PMs and growth leads - **Box:** IT managers - **Front:** Ops, sales, and support leads - **Looker:** VP of Eng or head of data - **Retool:** Internal tools engineers Though this may take time to nail down, it’s important to figure out not just your market segment and GTM motion but also *who* within an organization you want to target. > #### “Attacking everyone will pull your product in different directions, require you to build expertise in multiple channels at once, communicate to different types of customers at once, etc. It’s better to focus on one part of the market.” > > #### —[Brian Balfour](https://brianbalfour.com/essays/key-lessons-for-100m-growth), Reforge The beauty of product-led growth is you get a broad swath of adoption, and through that swath, you can find where the pull ends up being the strongest. The more focused you can get, the easier it’ll be to nail your positioning, outreach, and product strategy. ### 5. Sales-led companies often add a bottom-up self-serve product, primarily to drive lead gen A final takeaway for me from this research is that many sales-led companies—including HubSpot, Salesforce, Box, Databricks, and Zendesk—that previously required a demo before using the product later added a self-serve product that they use primarily to generate leads for their sales teams. Experimenting with a product-led strategy often pays off. > #### “If your company’s growth is driven by sales, acquisition is driven by how quickly the sales team can convert leads to customers. In other words, new customer growth is a function of how many salespeople you can hire and how quickly. However, there are enough customers out there who want to kick the tires and try your product without getting into a long-term protracted negotiation with a salesperson. If you don’t have self-serve onboarding, you will miss out on all these customers. And the biggest tragedy? You won’t ever know that you missed out on them.” > > #### —[Gokul Rajaram](https://medium.com/@gokulrajaram/self-serve-first-the-overlooked-but-essential-paradigm-underlying-great-software-companies-45a67dbec4c4), DoorDash ### In closing When planning your GTM motion, you basically have three decisions, each of which with a very small number of options: 1. **What market segment to go after** 1. VSB 2. SMB 3. Mid-market 4. Enterprise 2. **Who to go after within the organization** 1. **Top-down:** Founders, VP of x, Head of y, etc. 2. **Bottom-up:** Internal tools engineers, IC designers, etc. 3. **How to get to them** 1. **Product-led:** A self-serve product that users discover through SEO, ads, or referrals 2. **Sales-led:** A gated product that users discover through outbound sales I hope this post gives you a better sense of where your product fits, and thus where to get started 🙏 If you spend time with the table above and notice any other takeaways, I’d love to hear them 👇 [Leave a comment](https://www.lennysnewsletter.com/p/gtm-motions/comments) ## 📚 Further study 1. [The Transition: Layering sales onto a bottom-up self-serve product](https://www.lennysnewsletter.com/p/sales-bottom-up) 2. [Growth+Sales: The New Era of Enterprise Go-to-Market](https://a16z.com/2020/07/29/growthsales-the-new-era-of-enterprise-go-to-market/) 3. [Why Most Companies Fail at Moving Up or Down Market](https://brianbalfour.com/essays/key-lessons-for-100m-growth) 4. [SaaS Go-to-Upmarket](https://future.a16z.com/podcasts/saas-go-to-upmarket/) 5. [The “$20M to $500M” Question: Adding Top Down Sales](https://a16z.com/2020/12/03/adding-top-down-sales-bottom-up-enterprise-startup/) 6. [Moving upmarket and the ascent of SMB SaaS](https://www.bvp.com/atlas/moving-upmarket-and-the-ascent-of-smb-saas) 7. [Self-serve first: the overlooked but essential paradigm underlying great software companies](https://medium.com/@gokulrajaram/self-serve-first-the-overlooked-but-essential-paradigm-underlying-great-software-companies-45a67dbec4c4) 8. [Picking a GTM Motion](https://www.field-guide.unusual.vc/field-guide-enterprise/picking-a-gtm-motion) *Have a fulfilling and productive week*🙏 ## **🔥 Featured job opportunities** 1. **Snackpass**: [Product Manager, Payments](https://pallet.xyz/list/lennys-jobs/job/e3813aa9-51f9-405d-ab6b-b6e3338c4397) (SF, NYC, LA, Remote) 2. **Fabulous**: [Product Manager](https://pallet.xyz/list/lennys-jobs/job/aba1b987-d8fe-4160-be34-43ea3fe18079) (Remote) 3. **Stonks**: [Backend Web Developer, Founding team](https://pallet.xyz/list/lennys-jobs/job/4b47d0cb-9b97-41c8-88ab-e3c188e3c036) (Remote) 4. **Gtmhub**: [Director of Product Management](https://pallet.xyz/list/lennys-jobs/job/9a59fc25-67d1-4082-ba49-2b03c880500e) (Remote) 5. **Gearflow**: [Full Stack Software Engineer](https://pallet.xyz/list/lennys-jobs/job/bafacefd-3514-45a6-b88d-9e863a894fcd) (Chicago/Remote) 6. **Contra**: [Project Manager](https://pallet.xyz/list/lennys-jobs/job/edd82d32-289f-464a-9e93-b37d1ecaa382) (SF) 7. **Otto**: [Senior Engineer](https://pallet.xyz/list/lennys-jobs/job/88e962f7-aecf-4e50-b04e-9f6cfa3e5ff4) (Remote) 8. **Jetpack Workflow:**[Product Designer (UI/UX)](https://pallet.xyz/list/lennys-jobs/job/1653c4a3-0230-481c-a0fa-9b7203b2783d) (Remote) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* ## **🧠 Inspiration for the week ahead** 1. **Watch**: [Building the Perfect Squirrel Proof Bird Feeder](https://www.facebook.com/MarkRoberYouTube/videos/727828361391817/) [Watch on YouTube](https://www.youtube.com/watch?v=hFZFjoX2cGg) 1. **Read**: [What Is Happening to Facebook Performance Post iOS14.5?](https://www.thesistesting.com/insights/what-is-happening-to-facebook-performance-post-ios14-5) 2. **Read:** [Stack Overflow Developer Survey 2021](https://insights.stackoverflow.com/survey/2021) #### **How would you rate this week's newsletter? 🤔** [Great](https://t.sidekickopen82.com/s1t/c/5/f18dQhb0S7kF8cV_VXW1CdjwB59hl3kW7_k2847sD3qkVNxJHk1CX2ZcW2bzNJl8lkfc1101?te=W3R5hFj4cm2zwW4cQKtC3KcLnYW4hLZp03ZVbTxW1JB0ML1--tKxW20ZTw51-YpBFW1W_jBk1ZmvHBW21j9tt1-_j_TW1Vnkcj1V3fMvw1V21pC4Hp2&si=7000000001348012&pi=6174bab6-7009-4402-a497-3d6f867fbea1) • [Good](https://t.sidekickopen82.com/s1t/c/5/f18dQhb0S7kF8cV_VXW1CdjwB59hl3kW7_k2847sD3qkVNxJHk1CX2ZcW2bzNJl8lkfc1101?te=W3R5hFj4cm2zwW4cQKtC3KcLnYW4hLZp03ZVbTxW1JB0ML1--tKxW20ZTw51-YpBFW1W_jBk1ZmvHBW21j9tt1-_j_TW1Vnkcj1V3fMvw1V21pC4vX2&si=7000000001348012&pi=6174bab6-7009-4402-a497-3d6f867fbea1) • [Meh](https://t.sidekickopen82.com/s1t/c/5/f18dQhb0S7kF8cV_VXW1CdjwB59hl3kW7_k2847sD3qkVNxJHk1CX2ZcW2bzNJl8lkfc1101?te=W3R5hFj4cm2zwW4cQKtC3KcLnYW4hLZp03ZVbTxW1JB0ML1--tKxW20ZTw51-YpBFW1W_jBk1ZmvHBW21j9tt1-_j_TW1Vnkcj1V3fMvw1V21pC4kr2&si=7000000001348012&pi=6174bab6-7009-4402-a497-3d6f867fbea1) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋