We’re pleased to announce the Bowery Capital 2020 Startup Sales Stack Report! This report is meant to serve as a guiding framework for anyone evaluating sales solutions. Whether sales, marketing, customer success or management, if you’re thinking of using or buying software to optimize customer…
Sales enablement tools and the startups building them have taken on a new level of importance over the last few years as sales teams have become increasingly quantified and metrics-driven. While larger players like SalesForce (SalesCloud) and InsideSales.com have built successful sales enablement businesses taking a platform or suite-oriented approach, most new startups by volume have emerged as point solutions. By our estimation, growth in that volume of new entrants has been significant year-over-year. As companies with quantified sales teams have grown, experts in sales have opted to launch their own startups to solve problems they know well. A few areas in which we’ve seen a lot of activity include: sales ops & analytics (mostly in predictive lead scoring); training, coaching & incentives; calling / dialing; sales hiring; CRM management & integrations; email management / automation for sales; new approaches to lead gen; enablement of new sales channels (video, chat, webinar); and content solutions for sales.
At Bowery Capital, we have a unique viewpoint on sales enablement given that we see it from two angles: (1) as a fund 100%-focused on technology solutions selling into the enterprise, it’s a natural area of investment interest; and (2) early customer acquisition is our central focus in terms of value-add and portfolio support, so we work with our founders on a daily basis to help set up the right sales infrastructure for success (i.e. we end up using a lot of these tools ourselves). We therefore wanted to share a few thoughts on sales enablement themes we’ve been seeing, and highlight a few opportunities and challenges we see on the horizon for startups addressing this market.
In light of what we’ve seen, here are 5 suggestions geared toward founders of sales enablement startups:
1) Demonstrate A Clear Path To Reducing CAC
Employers managing large sales organizations have recognized that (assuming there is an element of product-market fit achieved) reducing customer acquisition cost (CAC) is absolutely critical to success. One of the earliest and most articulate proponents of this concept is David Skok of Matrix Partners, who pointed out nearly five years ago that, generally, the cost to acquire a customer scales up exponentially with sales complexity (the higher-touch the sales process is, the more “complex”). Hence, smart founders have found ways to relegate those elements of the sales process that do not require high-touch efforts (or high-value sales talent) to more specialized functions that are cheaper and more easily replaceable (e.g. SDRs, demos / webinars instead of meetings, inbound lead gen though content). In order to determine how exactly a sales funnel can be optimized, however, startups must meticulously measure each step and do their best to react to inefficiencies in real-time. This is where sales enablement solutions come into play. Too often though, the direct link to reduced CAC is unclear; these startups risk being “nice to haves.” As a startup founder, even if you’re just in beta, make sure you are collecting the right proof points and testimonials from your early partners so that you can pitch a hard ROI to target customers.
2) Don’t Increase Sales Complexity In The Name Of Intelligence
This point is simple and extends out of #1 above; the name of the game here is decreasing CAC by increasing sales efficiency. Any product that requires more input time than it saves in man-hours is doomed to failure. While CRM entry is often seen as a “homework”-type activity, because the data tracking involved is core to sales optimization, its value unquestionable. New solutions should reduce homework. More recent successful point solutions (e.g. SalesLoft, Tout) have done so by providing much of their value from within web or email. Instead of focusing on winning “app mindshare,” a more frictionless sales enablement approach is to automate processes in the background, or add value where reps already spend their time.
3) Flexibility To Customize Workflow Is Critical
The movement to quantify the sales process (especially in metrics-driven industries like SaaS) has resulted in some excellent sales benchmarks and best practices. It’s helped bolster a “common language” that startup salespeople, thought leaders and investors alike use to discuss sales strategy. Some tools moreover have become relatively standard, a la SalesForce in CRM. Don’t let that fool you into thinking, however, that every sales machine is or can be the same. Every company builds a sales workflow that becomes a critical aspect of its culture (especially as sales teams are often one of the bigger groups by headcount). If you’re interested to learn more on this point, check out our podcast coming this Friday on “Aligning Sales Development Through SLAs” with Sean Kester of SalesLoft. In our experience a sales workflow becomes a sort of proprietary, sacrosanct thing over time. Sales enablement tools must be flexible and customizable enough to fit any sales workflow.
4) Demonstrate Both Horizontal & Vertical Growth Opportunity
If you are a sales enablement startup, SaaS startup customers are your low-hanging fruit. They are likely very metrics-driven, extreme early tech adopters, and are probably agile enough to try out a variety of solutions. As you look to expand horizontally to other industries, you may start to see less quantified / agile sales teams. If you can’t provide them value and you’ve no good prospect of selling into anyone but SaaS startups, you’re not only limiting your TAM but also exposing yourself to the whims of the market, which may choke off startup capital down the road. Maximize your total universe of potential customers by ensuring that you cater to sales orgs, not just SaaS startups. That’s your horizontal growth story.
Just as important is the consideration around future expansion along the vertical axis: upsell opportunity, in other words. As in most software businesses that start out with low-to-transactional price points (e.g. <$50k / year), most sales enablement startups will eventually need to develop new features or product lines in order to upsell and grow ACV. Some businesses stay focused on being a best-of-breed point solution (e.g. Xactly for sales compensation), but still have broad enough horizontal demand and budget around that one pain point to fuel growth. In some cases though, that first product really is just a feature rather than a scalable business, and that’s a big risk. If it’s feasible that SalesForce or InsideSales could build a clone of your product within a year, you should have a strong explanation as to your defensibility and a clear expansion plan.
5) Predictive Maybe; Prescriptive Definitely
This last point is specific to sales analytics but I wanted to mention it given the number of startups we see that tout predictive capabilities. No doubt there are big opportunities in optimizing sales funnels through some sort of machine learning (e.g. around leads assignment, pricing, discounts, etc.). Various companies have sprouted up around this concept already. In most cases they have been more oriented toward top-of-funnel sales considerations that blend into marketing, like lead scoring (e.g. Fliptop, Infer, Mitingo, 6Sense, LatticeEngines). Others have been more explicit about their sales focus (e.g. Clari, C9, SalesPredict). It’s important to remember though that the factors driving a decisive deal win vs. loss are undoubtedly more complex that what’s tracked in most sales orgs’ CRMs. Additionally, most predictive modeling approaches require a serious amount of historical data to be accurate. So predictive might not always be the right answer.
What every sales enablement solution should strive to be, however, is prescriptive: become an invaluable step in the sales process by highlighting corrective actions at the right time and place. InsightSquared is a great example. Even though the product isn’t focused on being predictive in the AI sense of the word, by tracking things like pipeline coverage and projected rep performance, everyone from the CFO to the VP of Sales can use the platform to understand revenue health and act on areas of weakness. Another good example of prescriptive vs. predictive can be found in customer success software. While you’d think that predictive analytics and churn mitigation would go hand-in-hand, the most popular solutions in market (Gainsight, Bluenose and especially Totango) are really more workflow- and notification-oriented than deeply predictive. I do expect this to evolve as new solutions (cf. Preact, Frontleaf) mature, but most Heads of Customer Success I’ve spoken with care most today about their success reps knowing what they should be doing and when.
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