a16z Podcast | Finding Go-to-Market Fit in the Enterprise

1. 0:02 – 4:14

   Why Product-Market Fit Doesn't Unlock Growth in the Enterprise

   1. HTHanne Tidnam0:02

      Hi, and welcome to the a16z Podcast. I'm Hanne, and in this episode, Bob Tinker, author of the new book Survival to Thrival and founding CEO of MobileIron, and Peter Levine, a16z general partner, talk with me all about finding go-to-market fit for the enterprise startup. Even once you've found product-market fit, a lot of enterprise companies never quite hit the gas on growth and can stall out at that critical juncture. So what are the right tools to figure out that missing link of the right go-to-market model? How do you unlock real growth from that moment? What are the different sales and go-to-market models, and how do you choose between them? And what are the important metrics you need to be paying attention to? So Bob, let's first maybe start by talking about what product-market fit means for the enterprise startup. How is it different for the enterprise startup versus other categories?

   2. BTBob Tinker0:49

      I think there's a bug in Silicon Valley, which is that at our core, I think we're fundamentally a product shop.

   3. HTHanne Tidnam0:56

      Mm.

   4. BTBob Tinker0:56

      And we are really, really, really good at helping entrepreneurs build products, but we are not that good at helping entrepreneurs build go-to markets on the back of their products. There's not necessarily sort of the institutional knowledge that is passed from company to company to company about how to build go-to markets. For consumer companies, when you find product-market fit, the company takes off. Magic happens. Growth unlocks. For enterprise and B2B companies, where the sales process is more systematic, customer decisions are more complicated, you can get the product-market fit, win your first 15, 20 customers, but growth never really unlocks. One of the real core challenges for the B2B community is there's a lot of startups that get to product-market fit but never unlock growth and just sort of bump along.

   5. HTHanne Tidnam1:44

      How do you know you've got product-market fit if you're not actually growing? Doesn't it by, almost by definition mean you don't have it if you're not growing?

   6. BTBob Tinker1:51

      Well, uh, I think it's an order of magnitude about how fast are you growing.

   7. HTHanne Tidnam1:55

      Mm.

   8. BTBob Tinker1:55

      You know, in many ways for enterprise companies, getting to product-market fit means can you get to five, 10, 15, 20 customers that give you money, and are they actually using your product, and are they willing to say good things? Like, that's a huge accomplishment. It's incredibly hard, and there's a lot of startups and ideas that never make it to that point. For core enterprise companies, like, how do you go from winning 10 customers a month to 50 customers a month to 100 customers a month to 500 customers a month? And that's where sort of this missing link is between how do you win some customers and prove you have value to how do you really unlock rapid growth.

   9. HTHanne Tidnam2:35

      Mm-hmm.

   10. BTBob Tinker2:35

       There's a difference.

   11. PLPeter Levine2:36

       One of the things that we're seeing that's sort of a new phenomena are enterprise companies that do have a bottoms-up model.

   12. HTHanne Tidnam2:43

       Mm.

   13. PLPeter Levine2:43

       Whereby they do start with the consumer-

   14. BTBob Tinker2:46

       Hmm. Good point

   15. PLPeter Levine2:46

       ... which is typically a employee in a company where the product, you know, in some ways sells itself.

   16. HTHanne Tidnam2:54

       Mm-hmm.

   17. PLPeter Levine2:54

       And so that's another way of thinking about product-market fit in terms of can I get a product out there that's used by a large constituency of users. It's not 10 or 20. It's probably hundreds, thousands, maybe hundreds of thousands of users that start the flywheel going, and then the question is is how do you capitalize on that with, you know, more of a top-down, I call it self-serve versus sales serve in those environments. And we're seeing more of that now. And Bob, and-

   18. BTBob Tinker3:23

       I would, I think we're actually talking about the same thing.

   19. PLPeter Levine3:25

       Okay.

   20. BTBob Tinker3:26

       When we looked at a bunch of companies that had sort of won their first 15, 20 customers, either through going direct to employees-

   21. PLPeter Levine3:33

       Bottoms, yeah

   22. BTBob Tinker3:33

       ... bottoms up or top down.

   23. PLPeter Levine3:34

       Bottoms up or tops down, yeah.

   24. BTBob Tinker3:35

       The ones that did unlock growth, they were able to define their go-to-market playbook, which is what are the repeatable steps for how they find and win customers over and over and over and over and over and over and over and over again. And having your repeatable playbook applies whether it's tops down-

   25. PLPeter Levine3:54

       Got it

   26. BTBob Tinker3:54

       ... or bottoms up.

   27. PLPeter Levine3:55

       That's an excellent point.

   28. HTHanne Tidnam3:56

       I mean, I think what you're both saying it's really interesting is, is like once you get that started, whe- whether you get it started from bottoms up or from top down, there's this moment where you can kind of stall out, right, and get stuck, or you can get things-

   29. BTBob Tinker4:08

       Mm-hmm

   30. HTHanne Tidnam4:08

       ... in motion and start growth going. And that moment of getting stuck, I just wanna back up for a second and, like, zero in on that.
2. 4:14 – 8:32

   Where Companies Stall: Founder Selling, Scattered Models and Missing Urgency

   1. HTHanne Tidnam4:14

      What, what does that tend to look like? Like, where does, where do people tend to flounder there and-

   2. BTBob Tinker4:19

      Ugh. [laughs]

   3. HTHanne Tidnam4:19

      ... like, not kind of kick into gear, you know, you've got, you've finally got product-market fit, but then you just stall out. What does that actually look like?

   4. BTBob Tinker4:26

      Um, it's kinda funny actually. You sorta see this in the conversations, you know, between entrepreneurs in Silicon Valley, which is, "Hey, we want our first customers," and they sorta get told to go figure out this sales stuff.

   5. HTHanne Tidnam4:37

      Mm.

   6. BTBob Tinker4:37

      Go figure out this go-to-market stuff. And it was not a very organized conversation around, "Well, what does that mean?" There's a number of reasons why growth never really unlocks. It can be founder selling. It can be not finding urgency. It can be spreading your resources too thin. One of the places where I see these companies stall out is they had founder selling to be able to get to their first 10, 15, 20 customers, and then we start to add salespeople, their go-to-market model. They find, oh, wait a minute. A regular sales or marketing person can't actually do what the founder was doing. So, you know, people look at it, "Oh, maybe our, our sales team or marketing people don't really understand the product. They can't sell it." Like, you end up in these sort of dysfunctions because I think it didn't really have sort of the true market test of have you figured out how to find and win customers without relying on the founder.

   7. HTHanne Tidnam5:26

      Mm.

   8. BTBob Tinker5:26

      That's usually the first place I see things stall out is sort of over-reliance on founder selling. The second one is trying to do too many things at once, trying to do two or three go-to-market models at the same time. We're gonna do tops down. We're gonna do bottoms up. We're gonna do freemium. We're gonna do market led. And when you have a relatively small number of resources, they end up scattered so far that you never actually really figure out what the repeatable recipe is, so you end up spending an enormous amount of energy with very little result. So being able to pick your model and focus matters. The third place where I think people stall out is they Think that they know their passion for whatever their initial idea was and may not necessarily be the thing that actually unlocks growth.

   9. HTHanne Tidnam6:09

      [laughs]

   10. BTBob Tinker6:10

       There's sort of a funny story we have from the early days of MobileIron, which was we were early in mobile security. And when we first started, we built this security and policy engine for any mobile operating system so enterprises could adopt mobility as a first-class citizen. Yay. We were really proud of it. The really forward-thinking advanced customers would get it, but a lot of them would just sort of look at us and be like, "Why do I need that?" And we weren't able to translate that into what's the problem that got the customer to say, "Okay, I need that right now." And eventually what we did is we figured out that that problem was, "Dude, I need help with my iPhones."

   11. HTHanne Tidnam6:47

       And that's the urgency you're talking about.

   12. BTBob Tinker6:48

       And that was the urgency.

   13. PLPeter Levine6:50

       I think there's one other related piece with founders selling which is a very interesting point, 'cause we always encourage founders to go out and-

   14. BTBob Tinker6:58

       It's a-

   15. PLPeter Levine6:58

       ... sell, right?

   16. BTBob Tinker6:59

       ... super important from a learning perspective.

   17. PLPeter Levine7:01

       And, and fr- to learn.

   18. BTBob Tinker7:01

       Absolutely.

   19. PLPeter Levine7:02

       Right? And then, you know, this, this whole notion of the continuance of founders selling. The founders of our companies tend to be technical co- technical founders, right?

   20. BTBob Tinker7:14

       Right. Yep.

   21. PLPeter Levine7:15

       And they're so intimate with the product and the features and all that, and often they view sales as a bit of a black box. In my experience, the growth kinda stops when they try to run sales too much and kinda get involved in an area where they have n- not a lot of experience, right?

   22. HTHanne Tidnam7:32

       Yeah.

   23. PLPeter Levine7:32

       And then kind of, you know, hiring the sales VP or sales leader becomes a bit of an issue, and then-

   24. HTHanne Tidnam7:41

       Yeah

   25. PLPeter Levine7:41

       ... the founder's trying to micromanage the sales leader because-

   26. BTBob Tinker7:45

       Right. By saying, "Just do what I do."

   27. HTHanne Tidnam7:47

       I feel, I'm stressed out just thinking about it.

   28. PLPeter Levine7:49

       "Just do what I do." And like-

   29. HTHanne Tidnam7:49

       Yeah. [laughs]

   30. PLPeter Levine7:49

       ... all of, you know. And, and then the sales leader doesn't quite work out.
3. 8:32 – 16:13

   The Go-to-Market Fit Reckoning and How to Avoid It

   1. HTHanne Tidnam8:32

      It sounds very much like this moment of reckoning, right? Where you're about to go into this... And you talk about it like this p- that this moment of reckoning is sort of a missing link that people don't talk about, right? You call it go-to-market fit.

   2. BTBob Tinker8:43

      Right.

   3. HTHanne Tidnam8:44

      So f- my first question about that is how many people even recognize that it is a moment of reckoning like that? Or do they just kinda... Uh, is it just, you just sort of slide into it, and then you're either in it or not?

   4. BTBob Tinker8:55

      You typically slide and fumble your way into it. Where the light bulb usually goes off that people feel like, "Uh-oh, we may not have figured out our repeatable go-to-market model," is you win your first 15, 20 customers, maybe with founder-led selling, and you say, "All right. We've figured out product-market fit. It's time to grow." So the board comes in and says, "Okay, you figured out product-market fit. It's time to grow. Go do sales."

   5. HTHanne Tidnam9:18

      [laughs] Right.

   6. BTBob Tinker9:18

      "Go hire a VP of sales. Go sell." And so you go hire three or four people. Your burn rate goes up. You put together some PowerPoint pitches, and you wake up six months later, and you went from 20 customers to, like, 24-

   7. HTHanne Tidnam9:31

      [laughs]

   8. BTBob Tinker9:31

      ... or 25. And your burn rate accelerates, and everybody's looking at each other really stressed out. And it's a really scary moment for a company to sort of say, "All right. We just hit the gas to go grow, but we didn't actually really have our repeatable go-to-market model figured out." So that's usually when the reckoning comes.

   9. PLPeter Levine9:51

      You know, also when that reckoning moment comes, and I've seen this many times, you're also, the company is also debating is it a sales problem, or is it a product problem? You're trying to understand, like, maybe the product that I've built really isn't, doesn't solve... I love this urgency concept, doesn't really satisfy the urgency of the customer. And so where, what are the levers that you pull at that particular point in time to self-correct? Is it a product problem, or is it a go-to-market problem, right? And, you know, clearly over-hiring salespeople and all that are symptoms of something, right?

   10. BTBob Tinker10:30

       Yep.

   11. PLPeter Levine10:30

       Maybe you can't reproduce the founder selling. Product's great, but I can't reproduce the selling. Or the product isn't hitting the market or whatever, the only... And, and it's kind of a blended problem at that point in time.

   12. BTBob Tinker10:42

       Yeah. It's, it's a knot.

   13. HTHanne Tidnam10:43

       I mean, how do you start analyzing and pulling apart the knot before-

   14. PLPeter Levine10:46

       So-

   15. HTHanne Tidnam10:46

       ... presumably before you start building?

   16. PLPeter Levine10:48

       Well, look, all these things are presumably somewhat self-correctable, provided that you have enough runway to go self-correct this. I mean, there's no substitute for awesome product-market fit, and some companies nail it right away, and other companies, you know, start in one place and migrate to another. The problem is, is if you run out of runway, i.e. cash, you don't have time to figure it out. So one of the elements is that before a company goes and hires, you know, to Bob's point, the VP and... You know, once you hire a sales VP, what do they wanna go do? Hire a bunch of reps. So-

   17. BTBob Tinker11:27

       Right

   18. PLPeter Levine11:27

       ... now you have all this expense without knowing the urgency or what's actually gonna work. When I was CEO, I was, I, I used this ter- phrase with my team. I said, "We're not gonna in, we're not gonna expand the sales organization till we see the whites of their eyes."

   19. HTHanne Tidnam11:46

       [laughs]

   20. PLPeter Levine11:46

       And I don't know if you remember, like Bunker Hill, right? You only had a few bullets to shoot.

   21. BTBob Tinker11:51

       Right.

   22. HTHanne Tidnam11:51

       Yeah.

   23. PLPeter Levine11:51

       And you were n- instructed to not shoot the bullets until you saw-

   24. BTBob Tinker11:55

       Yep

   25. PLPeter Levine11:55

       ... the whites of, you know, the eyes coming-

   26. HTHanne Tidnam11:57

       Yeah

   27. PLPeter Levine11:57

       ... over the hill. And it's, you know, some subjectivity here to say, "Look, when the customer starts ... demanding this, then we're gonna go build a sales organization, right? And then- or add the reproducibility. And I waited, I waited for what some people could argue is too long a time. But I think it, we, we over-rotate too soon to go build up all this capacity-

   28. HTHanne Tidnam12:25

       Yeah

   29. PLPeter Levine12:25

       ... and all this, you know, customer support, and marketing, and sales, and all this stuff when there's no customer ready to actually go buy it. And-

   30. HTHanne Tidnam12:35

       I mean, what you're basically saying is wait until the urgency is p- painful.
4. 16:13 – 18:28

   How You Know You Have Go-to-Market Fit

   1. HTHanne Tidnam16:13

      And is that, is that when you know you've found the right go-to-market fit?

   2. PLPeter Levine16:18

      You know when you're out of this sort of conundrum-

   3. BTBob Tinker16:21

      Mm-hmm

   4. PLPeter Levine16:21

      ... when you actually have reproducibility from a sales capacity standpoint or some reproducibility from a pipeline to conversion-

   5. BTBob Tinker16:30

      That is a great point

   6. PLPeter Levine16:31

      ... standpoint, right? When you're out of it phase is if I hire a salesperson and they cost X and it takes Y time to generate Z revenue, and if I can then put, literally put on a spreadsheet and say I'm hiring one rep, two reps, three reps, four reps, and they can reproduce what's on the spreadsheet, that's the reproducible model.

   7. HTHanne Tidnam16:56

      Yeah. Now you're moving. The flywheel is going.

   8. PLPeter Levine16:58

      Right. The flywheel is going, and you can pred- you can ... You really at that point can start to predict the future, right?

   9. HTHanne Tidnam17:04

      It sounds like you can start to trust a little bit, like relax into trust a little bit from that.

   10. PLPeter Levine17:10

       Yeah. I mean, it's, uh ... If there really are those reproducible models, and even if it's bottoms up and it's not hiring somebody, it may be I have these leads that come in-

   11. BTBob Tinker17:18

       Turn into this many emails

   12. PLPeter Levine17:19

       ... through a marketing program-

   13. BTBob Tinker17:20

       Exactly

   14. PLPeter Levine17:20

       ... turns into 100,000 users. And those 100,000 users, 5% of them pay, and that's the model, and I convert after three months of use. And so those metrics all have shapes to it, right? The pipeline has a shape to it on sort of freemium. Sales reps have a shape to it on onboarding. And there are industry standards on all of this, but every company will have its own shape.

   15. HTHanne Tidnam17:45

       Yeah.

   16. PLPeter Levine17:45

       Right?

   17. BTBob Tinker17:46

       Yeah. I ... This idea of how do you know you've found it and you're out of it, I think, is a really profound question. At the essence of this repeatability is if you hire somebody new in sales, do they know what to do?

   18. HTHanne Tidnam17:57

       [laughs]

   19. BTBob Tinker17:57

       Like, if you have go-to-market fit, you've got urgency, you've got your sales model, you've got your playbook, you can hire somebody new in sales.

   20. PLPeter Levine18:04

       Right.

   21. BTBob Tinker18:04

       They kinda know what to do. You can be like, "Do this, and we win."

   22. PLPeter Levine18:07

       Yeah.

   23. BTBob Tinker18:07

       It's like you bring in more people or add more resources, you kinda know what to do, and I think that's really sort of the essence of this test. Which is if you have that, I think you're out of it.

   24. PLPeter Levine18:17

       Yeah.

   25. BTBob Tinker18:17

       And when you do that, you start to put more into the engine, and you feel that momentum of that repeatable go-to-market, and you go from winning five customers to 10 to 20 to 50 to 100 to 500.

5. 18:28 – 24:30

   Key Metrics: Rep Productivity, Ramp Time and Pipeline Coverage

   1. HTHanne Tidnam18:28

      What other kinds of metrics are you looking at to help you define that we're now out of the woods, you've found this go-to-market fit, and you're actually hitting real gas instead of, like, flooding the engine?

   2. PLPeter Levine18:37

      There are measurements that are, I th- I believe are very important. One of the key metrics for me is, you know, how do you know you're in what we call execution mode, this kind of, you know-

   3. BTBob Tinker18:49

      That's a good way to put it

   4. PLPeter Levine18:50

      ... rinse and repeat on the sales model? What I like to look at is that a salesperson is generating th- uh, greater than three times their loaded cost, meaning base plus commission. Let's say a salesperson costs $500,000 a year or $200,000 a year, they need to generate a 3X multiple on that cost. And it needs to be across the organization. You can't just have one person do it, and it can't just be the average because that's a very misleading indicator. I could have one sales rep who crushes it, and everyone else does zero. And if I average that, I would say, "Well, yeah, our 10 people are all over the 3X metric," but it happens to be one person. So I would do it as, you know, 70% of the sales organization need to be generating 3X their base cost, and that's how you know you're sort of out of this phase. And then that's also a way of knowing when you should hire more people because as that number gets greater and greater, let's say a salesperson can generate 5X their cost or 6X their cost, you're hiring too slowly.

   5. HTHanne Tidnam20:06

      Ah.

   6. PLPeter Levine20:07

      So there's more, there's more deals that that person can hire, and you're probably leaving things on the table. So you wanna normalize between four to five, you know, around 4X their loaded cost and keep an eye on that. If it's too little, you probably have overhired, right?

   7. HTHanne Tidnam20:22

      Yeah.

   8. BTBob Tinker20:22

      Right.

   9. PLPeter Levine20:22

      Where a person only is generating 1X, and that's probably in the early days. So that's kind of, that's a metric that is very important in terms of... And it's very simple, right? Like, it's not this complex, like-

   10. HTHanne Tidnam20:34

       Yeah

   11. PLPeter Levine20:34

       ... you know?

   12. HTHanne Tidnam20:34

       You can remember that formula.

   13. PLPeter Levine20:36

       Yeah.

   14. HTHanne Tidnam20:36

       Yeah. [laughs]

   15. PLPeter Levine20:36

       It's just, um... And it tends to work reasonably well.

   16. BTBob Tinker20:39

       If you think about sort of the end-to-end sales and marketing process, do you see as you invest more in the front end of the pipeline, you get more leads and more pipeline? Like, as you put X dollars in, you get Y out. Like, is it still linear or even getting better than linear, or are you starting to see decreasing marginal returns? That's sort of a, sort of a way to know how hard to push the gas pedal. When it comes to thinking about hiring reps or sales engineers, it's really all about ramp time. Do your reps reach full productivity in nine months, 12 months, six months, or three months? The moment for me when I knew at MobileIron we had found go-to-market fit was when my VP of sales came in and said, "Hey, I'm willing to take up my quota basically as, as high as you want because I know as long as you let me hire as many reps as I can because I can get them productive in six months, and I have so many opportunities I can't get to them."

   17. HTHanne Tidnam21:39

       Right.

   18. BTBob Tinker21:40

       He felt like he had a repeatable recipe to bring new reps on and make them productive and get them ramped in six months. That was the point where, for me, like, the bit flipped. We were sorta out of the woods.

   19. PLPeter Levine21:50

       One of the other elements to look at is pipeline itself. One of the metrics to be used in the industry is at the beginning of the quarter, you wanna have between three and five times the c- pipeline to close the quarter, okay? If you don't have four times the pipeline at the beginning of the quarter, you're not gonna make your number. And if you have over at the beginning of the quarter, beginning of the year, might have been a six, seven, eight, which means that you're dropping opportunities on the floor because the pi- the top-

   20. HTHanne Tidnam22:24

       Yeah

   21. PLPeter Levine22:24

       ... of the pipeline is fat with opportunities-

   22. HTHanne Tidnam22:27

       Yeah

   23. PLPeter Levine22:27

       ... and you don't have enough capacity-

   24. HTHanne Tidnam22:28

       You're not ramping fast enough

   25. PLPeter Levine22:28

       ... to go and do it, right? And so looking at that pipeline is also another way to kinda help modulate how you're gonna go hire salespeople to either, you know, take up the slack, m- meaning get after more opportunities, or don't hire so many people if the pipeline isn't there yet.

   26. HTHanne Tidnam22:46

       It sounds like-

   27. BTBob Tinker22:47

       Right

   28. HTHanne Tidnam22:47

       ... temperature reads almost.

   29. PLPeter Levine22:48

       Keeping the metrics very simple is way more important than having too many metrics, and then you're trying to measure too many things. We wanna measure everything, right? And it gets too complicated, and then you don't know exactly what to fix.

   30. BTBob Tinker23:02

       The fascinating thing that happens is once you get this repeatable playbook in place where you find and win customers and you sort of n- people know what needs to be done at each part of it, all of a sudden the company now sees the things they're working on, the people in marketing, the people in engineering, the people in support that are working on these different things that support the go-to-market playbook, they now see how what they're working on ties to the repeatable go-to-market playbook. And it was... I, I didn't sort of realize this going into this, but that turned out to be a very powerful sort of unifying force for the company-
6. 24:30 – 27:51

   Choosing the Right Sales Model: Sales-Led, Marketing-Led or Product-Led

   1. HTHanne Tidnam24:30

      So if we go back to that moment of trying to find with a Davy Crockett, like feeling your way through the woods to the right sales model, getting, gathering information, what are some of the questions you're asking at that point to find and identify what the right sales model is, especially if you're that founder who doesn't really know who, for, you know, it is a kind of black box?

   2. BTBob Tinker24:48

      Yeah, this is a [laughs] this is a great question because there's all sorts of different types of sales models you hear about, and there are certain sales models that are kinda faddish, that get pushed on you. Like, this is in vogue right now. Oh, like, you know, a freemium sales model is really exciting, so you should definitely do that.

   3. HTHanne Tidnam25:05

      [laughs]

   4. BTBob Tinker25:05

      Or, you know, you should follow Atlassian's model and have the no salespeople product-led model. Like, you hear about all these different things as a founder and a CEO, and you're honestly like, "How do I figure out which ones to do?" So if you sort of think about sales models as a spectrum, on the far left you have heavy touch sales-led, which you hire sales reps that call on customers to do big deals. In the middle, where marketing does the front end of the sales process, they find prospects, they drive them to an online eval, and then you watch the metrics on the online eval, and then an inside salesperson calls them and takes the deal from there. So it's like 50/50 marketing sales. And then on the far right you have a product-led or zero touch sales model where there's no salespeople and literally the customer goes from find to eval to online to purchase to upsell without a sales rep. So like an Atlassian or Twilio.

   5. HTHanne Tidnam25:59

      We talked about this on a podcast recently on the enterprise product podcast about-

   6. BTBob Tinker26:02

      Mm-hmm

   7. HTHanne Tidnam26:02

      ... bottoms-up growth. Martin used the, a metaphor of a slider bar, right? There's a slider bar from total organic bottoms-up growth up to, like, heavy touch.

   8. BTBob Tinker26:10

      Mm-hmm.

   9. HTHanne Tidnam26:10

      And where are you in the middle?

   10. BTBob Tinker26:11

       How do you figure out where you are in there?

   11. HTHanne Tidnam26:13

       How do you know where you are? Yeah.

   12. BTBob Tinker26:14

       Yeah. And this is something I've certainly seen to the venture capital industry push companies to sort of the zero touch product-led model because it's awesome if you can make it work 'cause it's super capital efficient. The problem is that it doesn't work for all companies and products. So the most important thing here is to pick the right model for your product and your customers. So then how do you do that? If you pay attention to how your customer buys, like what does that customer journey look like, that will lead you to one sales model or another.

   13. HTHanne Tidnam26:43

       For example...

   14. BTBob Tinker26:44

       You can distill it all down to one question, which is how does the customer decide to buy your product? How do they decide to buy? Not how do they physically purchase it, it's how they decide in their mind to say, "I'm gonna buy." If the buyer and decider are the same person and you can reach them with digital marketing, you can do a product-led Atlassian Twilio sales model. If the product and buyer are sorta two people that are right next to each other, like the buyer is the VP of marketing and the decider is the CEO, you can do a marketing-led sales model where it's relatively small number of people involved. If it's a committee decision where you'd have the CIO, the chief security officer, the VP of infrastructure involved, it's really hard to do marketing [laughs] led or product-led when you have-

   15. HTHanne Tidnam27:30

       Right

   16. BTBob Tinker27:30

       ... a committee decision. As you're winning those early customers, pay attention, like watch the cognitive process inside those customers for how they're actually deciding to buy. I think that's the biggest clue to where on that slider bar you end up. They're correlated with big size, small deals. But I think the essence of it is actually this how does the customer make the mental decision to buy.

7. 27:51 – 30:36

   Product Simplicity and the Product–Go-to-Market Loop

   1. PLPeter Levine27:51

      I might add one more element in, you know, sorta the individual being the buyer and the decider-

   2. BTBob Tinker27:59

      Mm-hmm

   3. PLPeter Levine27:59

      ... in one person versus committee. I mean, in some ways the product itself has to be simple enough. If it's an individual person, it has to be-

   4. BTBob Tinker28:09

      Mm-hmm

   5. PLPeter Levine28:09

      ... easy to understand.

   6. HTHanne Tidnam28:11

      Yeah.

   7. PLPeter Levine28:11

      If you have a super complex product going after the individual, their head might spin because it's like, "How do I even think about..." You know, it's super complicated to use, it's complicated to try, complicated to install. How complex is your product to allow the decider to do it with whatever vehicle you're actually explaining those features, right? The, the real exciting element to me is it was always assumed, oh, enterprise, direct sales because the product is complicated, blah, blah, blah, and consumer products would be this, you know, sort of viral uptake, decision-maker is the buyer. I think that there is a lot of really interesting innovation in ease of use for enterprise products that are now being decided and bought by individuals. Uh, Zoom is a great example. GitHub is a good example. Twilio is a good example. Dropbox is a good example. There are historical products which were super complicated in each of those areas, where you required an army of bo- deciders and an army of salespeople to get someone like, "What does this thing do?" and all that stuff, and how does it work. And I think that companies now who take user interface and design and simplicity of product in the enterprise are gonna be big winners. You can't just say we're gonna go to do this, you know, Atlassian bottoms-up model, but does the product have the elegance to be able to be sold without a sales organization? Enterprise companies actually are looking a little bit more like consumer companies when it comes to product design, fit and finish and all of that, which before they ne- you know, it was like, "Hey," like, "If I had a command line interface, that's enough with 1,000-

   8. HTHanne Tidnam30:00

      [laughs]

   9. PLPeter Levine30:01

      ... 1,000-page user manual," right?

   10. HTHanne Tidnam30:03

       Right.

   11. BTBob Tinker30:03

       Yeah. I think this is where this sorta go-to-market fit and all these other, like linking go-to-market and product come together. It used to be that-

   12. PLPeter Levine30:10

       Right

   13. BTBob Tinker30:11

       ... product was sorta over here and did product stuff-

   14. PLPeter Levine30:13

       Right, right

   15. BTBob Tinker30:13

       ... and sales was over here and did sales stuff.

   16. PLPeter Levine30:14

       And then you'd throw it over the fence.

   17. BTBob Tinker30:15

       Now it's product management's job-

   18. PLPeter Levine30:16

       Right

   19. BTBob Tinker30:16

       ... to figure out the middle.

   20. PLPeter Levine30:17

       Right, right.

   21. BTBob Tinker30:18

       What's really neat about this is you will start to see iterations between how does the go-to-market Put requirements on the product and then how does the product influence-

   22. PLPeter Levine30:27

       Right

   23. BTBob Tinker30:27

       ... the go-to-market? There's an iterative loop between those now that I think is actually in many ways sorta changing almost the cultures of how-

   24. PLPeter Levine30:34

       I agree

   25. BTBob Tinker30:34

       ... enterprise products get built.

   26. PLPeter Levine30:35

       I agree.

8. 30:36 – 34:45

   Pitfalls After Fit: From Survival Mode to Winning and Scaling the Team

   1. HTHanne Tidnam30:36

      Okay, so you mention these very spec- this very specific moment-

   2. BTBob Tinker30:39

      Right

   3. HTHanne Tidnam30:39

      ... when you know you, you, your metrics, your product is dialed in, you have a repeatable go-to-market strategy, you've picked the right business model. What are some of the like, "Whoops, don't step in that," like, "Okay, I got it good. Don't do this" moment, the biggest pitfalls basically that you can come to?

   4. BTBob Tinker30:55

      Yeah, so the, um, you know, in the beginning of building a startup, your mission is just don't die.

   5. HTHanne Tidnam31:00

      [laughs] Right.

   6. BTBob Tinker31:01

      It really is. Just live to fight another day. When you find go-to-market fit and you start to feel that momentum, the world changes. You shift from this how do we not die mode to, "Oh crap, how do we win?" And you've really entered a different mindset. Once a company makes this shift from how do we not die and how do we win, all hell breaks loose. And at this point your mission becomes, how do we now accelerate the business to become a category leader? So you have to go from being sort of ruthlessly frugal, pinching every penny and counting every nickel, to almost like calculated recklessness, where you're gonna try some things and spend some money on things and hire some people even though you're not sure it's totally gonna work. And that's a hard mindset shift-

   7. HTHanne Tidnam31:42

      That's a big one

   8. BTBob Tinker31:43

      ... for founders. The second thing that changes is the company culture, which is that usually up until this point you've been a very product-led culture, and that's part of like what has made the company successful. But now as part of accelerating to category leader, the company needs to have a balanced culture between valuing both product and go-to-market as equal citizens in the culture, and those kinda culture shifts are actually hard for teams. It's a journey. And, you know, this manifests in all sorts of ways, like just hiring. All of a sudden you ha- recruiting becomes a core competency for the company. Finding talent becomes a core competency. Managers are now evaluated for how well they can hit hiring targets 'cause that's the biggest thing that's gonna get in your way of execution. And then how do you actually onboard all these people and make them effective and part of the culture? Because what actually happens at this point is you can end up fracturing the culture of the company and in many ways sort of committing Harry Carry by growing too fast without actually onboarding people effectively.

   9. PLPeter Levine32:44

      At that point, one of the key attributes of... One of the key, it's not the only one, attributes of being a great CEO and great leader is hiring and retaining a world-class management team.

   10. BTBob Tinker32:55

       That is exactly right.

   11. PLPeter Levine32:56

       What I see is sub-optimizations made or just not, not having enough pattern-matching skills to actually go recruit the right people for the right roles. And, um, I think that that then results in suboptimal executives kind of n- not all being great at what they do, and then you run into problems that way. Because scale, scaling the organization is about having reproducibility and being able to hire people, being able to build processes into the organization, and if the executive team can't handle it and they're not capable of scaling, you run into other, you run into a lotta problems.

   12. BTBob Tinker33:35

       Yeah, I think that's exactly right. I mean, for me, I was a first-time CEO in 2008, and my job changed profoundly. It was more like from Captain America and sorta the platoon in the woods to more like Captain America and the Avengers-

   13. HTHanne Tidnam33:48

       [laughs]

   14. BTBob Tinker33:48

       ... where you had to go hire your band of Avengers, where each one of your executives has to have a special superpower that's better than you are at that job.

   15. HTHanne Tidnam33:56

       Or that you did not have.

   16. BTBob Tinker33:57

       Or that you did not have at that job.

   17. HTHanne Tidnam33:59

       You have the self-knowledge to know you didn't have. Yeah.

   18. BTBob Tinker34:00

       So in many ways, this hiring the leadership team that Peter's talking about is a tough transition for the CEO because the CEO has to let go of things that he or she was previously doing that they may think are important-

   19. HTHanne Tidnam34:13

       Do some soul-searching

   20. BTBob Tinker34:14

       ... and are scared of.

   21. HTHanne Tidnam34:15

       Yeah.

   22. BTBob Tinker34:15

       Uh, it's also... sort of creates some insecurity because all of a sudden you hire these people who are grade A executives that join, and the first thing they're gonna do is basically look at all the things you've been working on and basically look at how screwed up they are, and their job is to fix them. It creates this weird feeling-

   23. HTHanne Tidnam34:30

       [laughs]

   24. BTBob Tinker34:30

       ... of sort of insecurity, calling your baby ugly.

   25. HTHanne Tidnam34:33

       Right.

   26. BTBob Tinker34:33

       But I mean, if you hire a grade A VP of sales, they're gonna absolutely push you and the rest of the organization as they try and drive to scale, and it's gonna be uncomfortable. And if it's not, you may have not hired the right person.

9. 34:45 – 37:38

   Self-Awareness, Unlearning and the CEO's Time Horizon

   1. HTHanne Tidnam34:45

      So it sounds to me like so much of what you're describing is about this ability to kind of look around you and notice, right, what's g- learn from it, and then shift mindsets or mechanisms or m- you know, plans for the future based on that. So it's a, it's kind of about flexibility, right? How do you stay in that mode as the company grows and evolves and you are constantly being forced to sort of examine and then shift?

   2. BTBob Tinker35:13

      I think self-awareness is incredibly important because you constantly need to be reflecting about what are I and what are we doing well and not well, and what do we need to get better at? We spend so much time learning, and in many ways the very things that make us successful in getting from A to B, for instance, getting through the survival phase of the company, many of those same things actually now get in the way or could kill you at the next stage. So in addition to learning what you need to do next and how to be a leader at the next stage of the company, there needs to be a very conscious effort to look in the mirror and perhaps unlearn some of the things that got you there.

   3. PLPeter Levine35:52

      Yeah, I often describe running a company at different phases and your ability to turn the ship kind of like a rowboat versus a ship. When you're a small company and you're like in this little rowboat and one big wave can sink you, but you can use the oars and turn the thing on a dime. And then your boat gets bigger and bigger and bigger, and it's way harder to turn. And think about a big company. They're like a freaking cruise ship, right?

   4. HTHanne Tidnam36:21

      Yeah.

   5. PLPeter Levine36:22

      And to turn that thing, you have to start two miles ahead to turn it. So what does that mean in terms of running a company? To me, the horizon by which you look at as a CEO gets farther and farther out-

   6. HTHanne Tidnam36:34

      Oh, that's so interesting. Yeah

   7. PLPeter Levine36:35

      ... in terms of planning.

   8. BTBob Tinker36:36

      Good point.

   9. PLPeter Levine36:36

      Right?

   10. HTHanne Tidnam36:37

       Yeah.

   11. PLPeter Levine36:37

       Like, if your company is reasonable size, there's almost nothing you can do this quarter to change the outcome of this quarter. You're not gonna d- like, maybe you could help with a sales deal or whatever. It's probably like, "What can I do now to impact next year? If you're real small, what I do today can impact tomorrow." There's always new projects and new things that are the little boats that may surround the big boat, you know, in which case you can do things much more nimbly. If it's the big thing, it's hard to go and change on a dime when things are generally going in a, in, in some direction, right? CEOs and this whole self-awareness should be aware of kinda the time horizon by which I'm operating at and where my influence can most adequately be impacted, uh, given that horizon.

   12. HTHanne Tidnam37:29

       And when you need to pull out-

   13. PLPeter Levine37:30

       Yeah

   14. HTHanne Tidnam37:30

       ... your telescope basically. That's wonderful. Thanks so much for joining us on the a16z Podcast.

   15. PLPeter Levine37:36

       My pleasure. Our pleasure.

   16. HTHanne Tidnam37:37

       [laughs]

   17. PLPeter Levine37:37

       Thanks, Bob.

   18. BTBob Tinker37:38

       Thanks.

Episode duration: 37:40