Marketing’s Role on the Path to 100M in Revenue in a B2B Software Startup
The Marketing functions in B2B startups come from humble beginnings but play an increasingly important role on the path to that ideal benchmark for a successful exit of 100 Million in recurring revenue. B2B software companies generally come from two broad starting points:
1. Building Software for Larger Companies — They built technology for large companies and live somewhere between the expectations of some of the largest companies on earth and SMBs that want something far easier than they have so they can get started quickly with limited overhead & effort.
2. Building Software for Smaller Companies — They built technologies for small companies and have a ceiling where their more basic functionality doesn’t meet the needs of larger companies.
If you can choose where to start, choose the latter as there are more innovators in SMBs and they are far more forgiving of your lack of functionality. When you master SMB needs, you can begin to move up market with enterprise-class features like robust security, easy integration through a large API set and integrations with existing employee hierarchies, single sign-on, robust content to leverage out of the box, and analytics to measure performance.
Today, we are seeing a few double rainbow unicorns that bend reality by identifying a very thin but desperate market need and combine this with enough enterprise-class functionality to Cross the Chasm quickly and board a rocket ship to the moon. This perfect product-market fit out of the gates generally has marketing playing an almost inconsequential game of catchup, trying to plug the most obvious impediments to flying at Mach 1. These companies are few and far between and every CEO wonders why we can’t be like X. However, few companies capture the zeitgeist of the market with a thin sliver of value so perfect that it solves real pain and serves a wide number of customers.
Timing is everything here as is a crystal ball-like understanding of just what customers need to be successful & delighted. In addition, these companies need to marshal the right resources at just the right time to deliver this functionality and capture a viral word-of-mouth buzz. If you are not strapped into your seat on a rocket ship enjoying a delightful snack out of a tube, fear not. Not everyone can be a Slack, Square, or Pinterest, nor does everyone want to be for that matter. Most people’s version of creating value is a little bigger and deeper and their timing is not as impeccable. According to Crunchbase, the average SaaS startup takes 9 years to exit and this is no doubt a blended number with B2B software companies taking longer. Further, thinner solutions tend to exit faster, getting tucked in as a feature for other solutions with wider value propositions taking longer to mature.
Chances are you are in a company that is going to go through the whole journey <read slog> to capture the value a unicorn on steroids might have luckily stepped in. In this piece, I am going to take the lens of marketing and talk about what needs to happen at each stage of the journey for those of us who work at companies that aren’t instant unicorns. Further, I’ll focus on the type of company represented in number 2 above, a company that started out by serving SMB first. As I have been lucky in my career to see each stage of this journey, I lay out what I’ve seen and done, but your mileage may have varied or will vary. I write this piece primarily to put a stake in the ground for what I believe is one successful path, but hopefully I also attract the attention of others who have seen success in with alternate approaches.
0–5 Million in Revenue
Situation
It is at this stage that marketing begins as revenue gets off to a lumpy start with the truest of true believers. As such, teams including marketing are small and very entrepreneurial. One day you are setting up & staffing a tradeshow booth, the next day you are tuning a digital marketing campaign, and the following day you are creating collateral from scratch.
What You are Ideally doing
Ideally, this is a test and learn phase where you are collaborating closely with sales and product to execute a series of experiments to get to anything repeatable. If your price point is very low, you need to be low touch and largely digital in how you acquire interest. Higher price points require more people to weigh in and much more deliberation, so sales is likely more heavily involved. If you are doing this phase right, you are like a commercial process engineer striving to find that repeatable process.
5–20 Million
Situation
In this phase, your company has likely raised its first and possibly second round of funding after proving that solution works. There is an indication that people like it and can derive benefit from it. Your platform has likely hit the wall at least once as user counts increase. Marketing probably has to do some make-do-magic to fill the void of new things to talk about as the solution gets re-platformed with like-for-like features that actual scale, but are not newsworthy.
What You Are Ideally Doing
With a bit more budget, the marketing function can begin to specialize. Digital and demand experts take over from generalists and you are cranking up the cadence of campaigns to increase touches to draw more from the same addressable market (as feature growth is somewhat stagnant). You also need to begin looking much bigger than you are with a quality website to given even early innovative buyers the feeling that they aren’t taking a crazy risk. Here you are still generally to the left of the Chasm telling a story of innovation that is a shortcut to the success of your prospects. Storytelling comes more to the forefront and if you are lucky, you capture the imagination of the public with your emerging category or at least kudos from exemplar customers or compelling analysts. If you can hitch your emerging company to a space that is growing or experiencing a renaissance, you’ll will have an easier time breaking your company and a few worthy competitors away as a new category in the future.
20–40 Million
Situation
Depending on your price point, your commercial approach changes in this range as new functionality comes out on the new platform. If you have traditionally been very affordable, it is time to start blading pricing and defining a low touch entry point followed by a path for upsell and cross-sell with a highly repeatable sales process. If you started off more expensive, you probably got to this point by enabling some higher profile, lone wolf rainmaker sales executives by getting them credible leads, and giving them the basics to work their pop psychology magic with the stakeholders of your prospects.
What You Are Ideally Doing
In this phase, Marketing needs to double down on sales enablement. A formerly creative sales process needs to become a systematic machine such that a mere mortal sales representative can be successful. Ideally, you’ve mined the best sales cycles and you know what high value prospects to tee up and have honed your message to the point where sales is well armed with a winning story, collateral, and proof to move rapidly through the sales cycle. If you haven’t done it already, you need to be getting ahead of customer expectation to market and ensure the company can deliver repeatable quick starts that make the sale easier by providing clear value that is easy to show and proof of faster time-to-value. These solutions and associated marketing and sales motions attract the pragmatist buyers you need to Cross the Chasm. To lock in value in this phase, Marketing needs to be a stalwart advocate of product-led growth so that customers can see, try, buy, get deeply engaged, and buy again all within the software. Product-led personnel may end up in Marketing, Customer Success, Product, or in its own growth function. In any case, you need to do the work which may involve managing some of your own engineers or signing up to be a great contributing partner to the team that is leading this charge.
40–70 Million
Situation
You’ve ideally Crossed the Chasm in your initial vertical and can appeal to prospects in that vertical as a very safe choice with real data and testimonials from pragmatic buyers that look like them. Also, at this time, more technology is coming online and product management is driving deeper into vertical functionality. If your solution is niche-y or initially provided a narrower value prop, you may have verticalized even sooner than this.
What You Are Ideally Doing
At this stage, it is time to replicate success, get your category to loom large on the map, and win some powerful friends. This may include press, analysts, or partners. You’ll need help expanding to adjacent verticals using the vertical you are known in. You’ll need to double down on expertise here, because if you look like you don’t get what that vertical does, those member companies may effectively push you back to the other side of their chasm. Product marketers from that domain who get loud with industry events, blogs, videos, webinars, articles, and write well researched collateral etc., allow you to reach more deeply into these new areas quickly. On the digital, website, and campaign front, you need to be verticalizing too. The most successful companies at this size begin to form pods where sales, marketing, customer success, and product are working together in a vertical. This may be a dotted line or stronger supported by central competencies in the core marketing org like digital, website, campaigns, marketing ops, events, branding etc. Here you are replicating success, but giving enough autonomy for these teams to optimize for their own vertical. This structure also breeds healthy competition that gives everyone more to strive for.
70–100 Million
Situation
At this stage, you are knocking on the door of an exit where either the public affirms your value or another larger company does. This is a phase where it is important to keep the company on the rails and dress it for its next job. There is likely another re-platform afoot with its corresponding freeze in feature growth. The second or third round of even more specialized talent may be getting itchy, but everyone who is on-board can see the prize.
What You Are Ideally Doing
While you have tuned your image for your verticals up to this point, it is now time to turn it up for the market. The next wave of customers will come from the late majority buyers who heard about you from either someone they know that is using you (word of mouth) or a public mention. Branding needs to be jeweled for any remaining flaws. Optics of events needs to be scrutinized to ensure you’ll be buzzworthy. PR has been helping all along with vertical knowledge of your solution leading to demand gen, but now it is time to double down on wider recognition. The pursuit of mass media needs to get turned up and your analyst and review site efforts need to take on a new level of urgency. If you haven’t been all over negative reviews, you need to redouble your efforts to show increasing levels of end user satisfaction. You also need to tell the story of how your customers have grown with you and continuously increased the value they have derived from working with you. The analog of this, the increase in spend per customer and a plausible story to take this growth to new verticals will be required for an exit, so start early. If you get this phase right, all eyes will be on you and you need to be ready to turn this attention into positive sentiment, an accelerating new customer count, a steep slope in revenue.
What I outline here is a ton of methodical hard work with a willingness to expand or change focus over time. As most of us statistically will never ride the double rainbow unicorn rocket ship, plan for some of the hardest work you’ll ever love. Hard work build character though, and those who embrace it and win are humble enough to learn from others, and increasingly empower their teams to make their own mark. Do all this well and you might just make it through this gauntlet to the join the handful of well publicized and colorful unicorns already dancing on the moon.
Ken Pulverman is a five time marketing & product leader whose work has driven two acquisitions, one IPO, and a promising D series work in progress. Ken consults on the topics of strategy, marketing, and product to primarily tech companies under his brand SageCMO.
