Like a lot of VC firms, we’ve spent the past few weeks working closely with our portfolio companies, speaking with industry experts, and attending/hosting virtual webinars and roundtables to get a better sense of what’s going on with enterprise sales during the current COVID-19 environment. This is a summary of what we’re hearing and how we’re seeing best-in-class startups respond:
Top of funnel
Top of funnel for most enterprise companies is a mess even if you are succeeding. All activities – emails, phone calls, are down by 50-80% on average. There’s just a lot in flux and it’s tough to see anyone meeting or beating their activity or outcome numbers this quarter. Interestingly enough, we are hearing of companies see an uptick in F2000 discovery meetings, presumably as individual prospects poke around new technologies while WFH. TBD whether this flows through to closed deals or is just spinning wheels.
Bottom of funnel
Bottom of the funnel is industry-specific and priority-specific. Industry-specific meaning deals with prospects in retail & restaurants, hospitality, aviation, etc. are not moving. It is also industry-specific in that a legal team or procurement team has never worked from home before so they just don’t know what to do and are working through it. On priority-specific, we are seeing huge deprioritization of non-essential initiatives. Classic ROI statements here – if you solve a cost problem and / or are work essentials (hardware, security, etc), you are in a better spot. If you are revenue-focused, then it’s really tough.
We’re seeing companies who are getting slowed down in the contracting process get creative with LOIs and pilots in order to move an engagement along and decrease time to value. Shortening/simplifying implementation and lift required from the customer are key while companies are less organized and have less cross-team bandwidth in this remote environment.
Post-sale
We’re seeing companies get creative with payment terms in order to get deals done. Less upfront payments, more payment plans, discounts predicated on longer term agreements, etc. Current customers are asking for reduced pricing and delayed payments. The best companies are proactively working with their customers on pricing and payment terms that solve the customers’ near-term challenges while also preserving their long-term pricing integrity. Applying the give-get framework with finesse is key here. If a company asks for a 20% discount, come up with a plan that gives them a short-term discount to help them through their near-term pain, while also gradually increasing pricing back to normal and negotiate an extension in the current contract term for your “get” in this scenario.
GTM Tweaks
Sellers are getting creative about honing their messaging to show their product as a need-to-have, cost-saving, easy-to-implement solution. We’re seeing companies create new marketing collateral to elevate certain features and benefits, as well as repurpose parts of their product to solve a new, more-pressing customer pain point or use case. In parallel, companies are further refining their ICP and target buyer persona, focusing on the people that need their product the most with highly curated messaging. Overall, sellers are leaning in with value to build up good will down the road – ungating valuable content, organizing virtual webinars with valuable information for prospects, etc. Sales reps are also changing their tone – less pressure on prospects to sign a deal, more focus on providing immediate value and embracing the human element of sales.
Broad industry macro observations
1. F2000 CIOs/CTOs are focused on work essentials (hardware, endpoint security, cyber, networking, etc.) and then how they are going to spend stimulus money. They want to invest in the rebound and are focused on costs.
2. Digital Transformation Acceleration – according to Deloitte, PWC, McKinsey QuantumBlack and others, business is likely to be off the charts. Everyone has to deal with finding more leverage, saving more money, etc. You will see digital transformation journeys accelerate.
3. The widest barometer is Forrester and Gartner. They talk to F2000 CXOs. Andrew Bartels who is principal analyst at Forrester hasn’t really changed his software forecast but revised down pretty much everything else. Here is a breakdown: link.
How are sales leaders responding?
Most companies have recognized that they are not going to hit their numbers this quarter or this year. The best sales leaders are getting out in front of it:
1. Thinking Weekly: Instead of giving Q2 forecasts/goals, taking it week by week and adjusting on the fly given the fluidity of the situation. Looking at weekly pipeline changes and weekly activities vs. monthly.
2. Quota Revisions: They have to be revised down. Less activities, less actions, less revenues. One sales community of 10,000 people indicated 70-80% of them were revising quotas down, mostly AEs.
3. Re-thinking success: If deals are not going to close in the near-term, think about other ways to define success to keep your reps productive and motivated.
4. Using leading indicators to talk through estimates: Speak in terms of “if we were to see this leading indicator hold…we could expect to hit X or Y revenue number.” Most of this is budgets and business justification-based.
We’ll continue to provide updates in the coming weeks on what we’re seeing and how leaders are adapting their approach to sales during COVID-19. We’d love to hear thoughts – tweet us @BoweryCapital or email evan.mcelwain@bowerycap.com.
