Conquering Dragons: How Technical Founders Learn Enterprise Sales
6 Leading DevOps Founders Describe Their First Enterprise Win
By: Timothy Chen & Amanda Robson
Conquering the Enterprise dragon
For technical founders that lack prior exposure to the business side of things, figuring out how to sell to ‘Enterprise Dragons’ (aka Fortune 500 customers) is a foreign concept. Many underestimate the difficulty, and others see the quest as extremely daunting. Some have described the journey as an epic saga, where the ‘Heroes’ (aka founders) face multiple life threatening challenges along the way.
This is why we did some discovery to learn how the best technical founders took on their first enterprise sale. We interviewed 6 leading DevOps founders who went through this hero journey, and while each founder faced different challenges, learnings from each journey can help today’s early-stage technical founder take on their first Enterprise Dragon.
The 6 founders that have conquered many dragons
To set context, the first paying enterprise customer (at least $10K annual contract value, but at times up to $100K) for these DevOps companies typically came 1-2 years into the company’s life, around the time of their Series A. Some were not enterprise focused to start - HashiCorp, Kong, and LaunchDarkly used bottoms-up sales models before their first enterprise deal. Once demand from larger accounts was clear, they developed enterprise go-to-market motions to meet that demand.
Meeting the Customer
There are different ways to get introduced to enterprise customers. In DevOps, customers typically engage with the product well before the sales process, often through the company’s underlying open source project. For HashiCorp, D2iQ, Lightstep, and Kong, enterprise customers were part of their open source community before they started paying.
Another strategy to attract enterprise customers in the DevOps space is to develop and name a new category. LaunchDarkly developed the idea of “feature flags as a service” and built a strong content strategy around it, which came with search engine optimization (SEO) benefits.
Another route is getting a warm introduction from a personal connection or an investor’s network. That strategy is what brought Algorithmia their first paying enterprise customer.
An early technical founder that is starting his/her journey, working with smaller companies, is inspired by successful startups that work with larger enterprises to do the same.
The Sales Process
After the initial introduction to the customer, the courting process began. Across all 6 companies, the sales process took much longer than what the founders had initially expected. It took 4-12 months to get from initial introduction to a closed deal with many stakeholders involved.
Key learning: Know your customer profile
A refined definition of your customer profile can make go-to-market much easier. At HashiCorp, go-to-market was initially designed for SMBs, but once the opportunity in the enterprise became clear, they reframed their pricing, positioning, and sales motion to successfully go after that segment.
At Lightstep, early adopters were “hipster” tech companies. These were fast-growing mid to late stage startups with forward-thinking engineers that had a budget and could move quickly. Their go-to-market motion was tailored to these types of companies.
At Kong, they focused on companies making the transition to microservices. They did not try to sell the concept of microservices to companies not yet interested in building that way.
Key learning: Founders should own early sales
At LaunchDarkly, they did not hire a salesperson until they passed $500K in sales. They believed founders needed to understand the buyer and their needs and convey those back to the engineering team when the company was early in its journey.
At HashiCorp, the CTO Armon Dadgar flew to Australia to train their first enterprise customer.
At Kong and Algorithmia, the founders acted as initial sales engineers working directly with prospects to close early deals.
Founders have to go through the hard training themselves.
Key learning: Make the architect successful; the user is your internal champion
When selling DevOps products to enterprise companies, there will be many personas that have to sign off on the sale. There is an economic buyer (typically VP Engineering or VP Infrastructure), legal, procurement, security, plus the architect (or engineer, title can be company-dependent) who will be the ultimate user. The architect will have a lot of sway in the decision to buy.
At Lightstep, the architect was involved in testing the technology, as well as negotiating the terms of the contract.
At Kong, the team had a Slack channel during the proof-of-concept (POC) phase that was supported 24 hours a day to make sure the architects were happy. Kong’s CTO, Marco Palladino, can still remember the level of support they gave early enterprise customers:
“I would be at Christmas dinner managing Slack messages coming from our customers in Japan.”
At D2iQ, the architect would be the key sign-off on whether roadmap features were satisfactory to translate the POC into a closed deal.
Key learning: Price with procurement in mind
After key stakeholders decide they want to buy, the contract will move to the procurement team/department (this is often part of the finance or operations teams, and not in engineering). Procurement will want to understand the structure of the contract (which will include the unit pricing is based on) and the budgeted/proposed internal ROI. Then, they will likely try to negotiate the price down.
At LaunchDarkly, initial pricing was based on events (a usage-based metric). That ended up being a difficult metric for finance and procurement to understand. Due to that feedback, LaunchDarkly moved to per-seat pricing.
At D2iQ, pricing was based on comparable products and also considered what discounting to expect based on what similar products experienced when selling to enterprise customers. The company’s Co-CEO Tobi Knaup spent time with executives and investors to collect this data.
Diego Oppenheimer learned early-on the role procurement played in the sales process:
“Procurement’s entire job is to knock vendor prices down and they have no idea what your product does or the value the organization is getting… they have a KPI, which is what did the list price come in at and what did it drop down to.”
Key learning: Be prepared for bespoke requests
When you are a small vendor selling to a large enterprise customer, you will likely need to accommodate product feature requests. Being customer-centric is important, but you want to avoid accidentally becoming a services company. As a small startup, resources are limited. Knowing what to spend time and money on and what to say no to is important.
At Kong, their first enterprise customer would only buy if they had a developer portal. In order to get the deal over the line, Kong acquired a small company out of New Zealand that had a portal called Gelato.io. They knew other enterprise customers would want that functionality so there would be enough value generated over time to justify the acquisition.
Ben Sigelman had to build in a new programming language for an early enterprise customer:
“I remember trying to write a Rails client, when I’d only ever used Ruby for three weeks in my life...eventually that customer did end up converting [so it was worth it]”
Key learning: Run in production environments early if that is where ROI will be demonstrated
If your technology will demonstrate more value to the customer by running in a production rather than a POC environment, make it easy to get to production fast. At Lightstep, contracts were fully cancellable for the first 2-3 months. This made it easy for procurement to sign off on deals and move Lightstep’s technology to production quickly.
The founder finally shows success in training with the help of the team and advisors
Key learning: Put together a closing plan
Well-trained sales executives and managers should have a closing plan. This is a document outlining the timeline to a signed contract and the steps that need to happen along the way. It will also include the stakeholders who need to sign-off on the purchase, who the champion(s) are, and what the potential blockers are. It’s important to keep all stakeholders from the customer’s side in the loop on the status of the closing plan throughout the sales process.
When Algorithmia was going through their first enterprise deal process, they underestimated the time it would take to close the sale and the number of stakeholders involved. Unfortunately, this came at the same time they were heading into a fundraise and having that customer closed was important. Despite underestimating the process, they were still able to get the deal closed, but it would have been much smoother with a closing plan.
Reflecting on the Journey
We had our 6 DevOps founders reflect back on the journey they went through developing their early enterprise sales motion. Below are some of their learnings.Key learning: Don’t underestimate the human element of sales
People buy from people. At Kong, the team was super high-touch with customers. They had a wartime salesperson who was relentless at making customers successful and because of that was able to close their first $2M of total contract value during the first 6 months the company was in market.
At HashiCorp, their first enterprise deal process taught them how relationship-driven upmarket sales are.
It’s why the CTO Armon Dadgar flew to Australia to meet with their first customer in person.
At LaunchDarkly, they would end customer meetings by saying:
“we will take care of you”
They believe their customer-service mentality is a key reason many early customers are still with them today.
Key learning: Time to “wow” matters
Making it easy for customers to quickly see value in the product makes the sales process a lot easier. At Kong, the product was simple to adopt and you did not need to learn the entire platform to start using it or seeing value from it.
At D2iQ, the full version of their product took time to get set up so they put out a free version called “Elastic Mesos” that customers could spin up in under 15 minutes.
Founders learning to master the details of this process
Key learning: Add enterprise features early on
In order to avoid repeating work on enterprise customer security questionnaires, our founders would get SOC 2 certifications early. Further, enterprise customers often want standard “enterprise features” like single sign on (SSO) integrations so it’s good to invest in those early.
Key learning: Have a high quality “about us” page on your website
Enterprise customers that buy from small startups are taking a lot of risk. An easy way to gain credibility is investing in a thoughtful “about us” page that highlights who the team is and their credentials.
Key learning: Celebrate sales wins!
Celebrating wins internally is important. Being at an early stage company is hard and takes a lot of work to be successful - properly celebrating milestones is important.
At D2iQ, they had a tradition of sabering a champagne bottle as a team when new deals closed. Everyone on the team would then sign them.
Enterprise Sales in Challenging Times
In the remote world of shelter-in-place, enterprise sales look different. You can’t meet in person or go on-site to do a demo or training. We asked our founders how selling to enterprises is different in today’s environment. Below are their perspectives.
During this crisis, founders need to find the strongest dragon.
Key learning: Customer profile matters a lot in today’s world
There are segments of the economy that have been hit harder than others. Spending time trying to aggressively close deals with companies that are themselves struggling will not yield the best ROI. For DevOps companies, focusing on closing deals in verticals such as gaming, entertainment, or ed-tech that are growing and managing scale issues will be a better use of time.
However, this is a good time to show empathy to current and potential customers that are struggling so when budgets come back, you are the first vendor they call.
Key learning: ROI matters today more than ever
Innovation labs and research projects are getting pushed to the side. Budgets are constrained, even for software infrastructure, so products that can clearly demonstrate ROI through cutting costs or performing a function more efficiently or effectively are ones that will be able to get deals signed.
Key learning: Rethink go-to-market for a virtual world
Rethink all go-to-market activities for a video-based environment. Assume there will be no in-person conferences in the near future so creating or sponsoring virtual events can be a good alternative.
Lightstep effectively used this strategy when they helped put on the Deserted Island DevOps conference in Animal Crossing.
Tying it All Together
For technical founders selling to enterprise customers, the first sale can be very challenging. Figuring out how to manage the enterprise sales process is critical to getting companies off the ground. What’s not captured above is the emotional rollercoaster of going through this process given the many unexpected hurdles that founders have to navigate.
We hope by sharing learnings from some of the best technical founders on how they managed early enterprise sales, founders going through this journey for the first time can better understand what to expect, how to plan, and can be better equipped to slay their Enterprise Dragons.
If there are other topics early DevOps founders would like more information on, feel free to reach out to amanda@cowboy.vc or tim@essencevc.fund
Special thanks to the team at covatar.com for the awesome support on illustrations!
